Correlation Between Hongrun Construction and Hunan Investment

Can any of the company-specific risk be diversified away by investing in both Hongrun Construction and Hunan Investment at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hongrun Construction and Hunan Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hongrun Construction Group and Hunan Investment Group, you can compare the effects of market volatilities on Hongrun Construction and Hunan Investment and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hongrun Construction with a short position of Hunan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongrun Construction and Hunan Investment.

Diversification Opportunities for Hongrun Construction and Hunan Investment

-0.15

Correlation Coefficient

Hongrun Construction  Hunan Investment

Good diversification

The 3 months correlation between Hongrun and Hunan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hongrun Construction Group and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment and Hongrun Construction is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hongrun Construction Group are associated (or correlated) with Hunan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Investment has no effect on the direction of Hongrun Construction i.e., Hongrun Construction and Hunan Investment go up and down completely randomly.

Pair Corralation between Hongrun Construction and Hunan Investment

Assuming the 90 days trading horizon Hongrun Construction Group is expected to generate 1.46 times more return on investment than Hunan Investment. However, Hongrun Construction is 1.46 times more volatile than Hunan Investment Group. It trades about 0.04 of its potential returns per unit of risk. Hunan Investment Group is currently generating about 0.0 per unit of risk. If you would invest  464.00  in Hongrun Construction Group on December 24, 2024 and sell it today you would earn a total of  21.00  from holding Hongrun Construction Group or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hongrun Construction Group  vs.  Hunan Investment Group

Hongrun Construction

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hongrun Construction Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hongrun Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hunan Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hunan Investment Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hunan Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hongrun Construction and Hunan Investment

The main advantage of trading using opposite Hongrun Construction and Hunan Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongrun Construction position performs unexpectedly, Hunan Investment can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hunan Investment will offset losses from the drop in Hunan Investment's long position.

The idea behind Hongrun Construction Group and Hunan Investment Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.