Correlation Between Hongrun Construction and Orient Sec

Can any of the company-specific risk be diversified away by investing in both Hongrun Construction and Orient Sec 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 Orient Sec 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 Orient Sec Co, you can compare the effects of market volatilities on Hongrun Construction and Orient Sec 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 Orient Sec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongrun Construction and Orient Sec.

Diversification Opportunities for Hongrun Construction and Orient Sec

0.07

Correlation Coefficient

Hongrun Construction  Orient Sec

Significant diversification

The 3 months correlation between Hongrun and Orient is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hongrun Construction Group and Orient Sec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Sec 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 Orient Sec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Sec has no effect on the direction of Hongrun Construction i.e., Hongrun Construction and Orient Sec go up and down completely randomly.

Pair Corralation between Hongrun Construction and Orient Sec

Assuming the 90 days trading horizon Hongrun Construction Group is expected to generate 1.41 times more return on investment than Orient Sec. However, Hongrun Construction is 1.41 times more volatile than Orient Sec Co. It trades about 0.07 of its potential returns per unit of risk. Orient Sec Co is currently generating about -0.12 per unit of risk. If you would invest  461.00  in Hongrun Construction Group on December 26, 2024 and sell it today you would earn a total of  39.00  from holding Hongrun Construction Group or generate 8.46% return on investment over 90 days.

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

Hongrun Construction Group  vs.  Orient Sec Co

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 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongrun Construction may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Orient Sec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orient Sec Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hongrun Construction and Orient Sec

The main advantage of trading using opposite Hongrun Construction and Orient Sec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongrun Construction position performs unexpectedly, Orient Sec 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 Orient Sec will offset losses from the drop in Orient Sec's long position.

The idea behind Hongrun Construction Group and Orient Sec Co 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.