Correlation Between Hongrun Construction and Ye Chiu

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

Diversification Opportunities for Hongrun Construction and Ye Chiu

0.94

Correlation Coefficient

Hongrun Construction  Ye Chiu

Almost no diversification

The 3 months correlation between Hongrun and 601388 is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Hongrun Construction Group and Ye Chiu Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ye Chiu Metal 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 Ye Chiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ye Chiu Metal has no effect on the direction of Hongrun Construction i.e., Hongrun Construction and Ye Chiu go up and down completely randomly.

Pair Corralation between Hongrun Construction and Ye Chiu

Assuming the 90 days trading horizon Hongrun Construction Group is expected to generate 0.99 times more return on investment than Ye Chiu. However, Hongrun Construction Group is 1.01 times less risky than Ye Chiu. It trades about 0.21 of its potential returns per unit of risk. Ye Chiu Metal is currently generating about 0.15 per unit of risk. If you would invest  334.00  in Hongrun Construction Group on September 3, 2024 and sell it today you would earn a total of  131.00  from holding Hongrun Construction Group or generate 39.22% return on investment over 90 days.

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

Hongrun Construction Group  vs.  Ye Chiu Metal

Hongrun Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hongrun Construction Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongrun Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Ye Chiu Metal

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ye Chiu Metal are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ye Chiu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hongrun Construction and Ye Chiu

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

The idea behind Hongrun Construction Group and Ye Chiu Metal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.