Correlation Between Gotion High and Huaxia Fund

Can any of the company-specific risk be diversified away by investing in both Gotion High and Huaxia Fund 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 Gotion High and Huaxia Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gotion High tech and Huaxia Fund Management, you can compare the effects of market volatilities on Gotion High and Huaxia Fund 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 Gotion High with a short position of Huaxia Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotion High and Huaxia Fund.

Diversification Opportunities for Gotion High and Huaxia Fund

-0.62

Correlation Coefficient

Gotion High  Huaxia Fund

Excellent diversification

The 3 months correlation between Gotion and Huaxia is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gotion High tech and Huaxia Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Fund Management and Gotion High 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 Gotion High tech are associated (or correlated) with Huaxia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Fund Management has no effect on the direction of Gotion High i.e., Gotion High and Huaxia Fund go up and down completely randomly.

Pair Corralation between Gotion High and Huaxia Fund

Assuming the 90 days trading horizon Gotion High tech is expected to under-perform the Huaxia Fund. But the stock apears to be less risky and, when comparing its historical volatility, Gotion High tech is 1.01 times less risky than Huaxia Fund. The stock trades about -0.24 of its potential returns per unit of risk. The Huaxia Fund Management is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  261.00  in Huaxia Fund Management on October 10, 2024 and sell it today you would earn a total of  37.00  from holding Huaxia Fund Management or generate 14.18% return on investment over 90 days.

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

Gotion High tech  vs.  Huaxia Fund Management

Gotion High tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gotion High tech 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.

Huaxia Fund Management

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gotion High and Huaxia Fund

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

The idea behind Gotion High tech and Huaxia Fund Management 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.