Correlation Between Shenzhen Clou and HUAQIN TECHNOLOGY

Can any of the company-specific risk be diversified away by investing in both Shenzhen Clou and HUAQIN TECHNOLOGY 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 Shenzhen Clou and HUAQIN TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Clou Electronics and HUAQIN TECHNOLOGY LTD, you can compare the effects of market volatilities on Shenzhen Clou and HUAQIN TECHNOLOGY 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 Shenzhen Clou with a short position of HUAQIN TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Clou and HUAQIN TECHNOLOGY.

Diversification Opportunities for Shenzhen Clou and HUAQIN TECHNOLOGY

0.69

Correlation Coefficient

Shenzhen Clou  HUAQIN TECHNOLOGY

Poor diversification

The 3 months correlation between Shenzhen and HUAQIN is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Clou Electronics and HUAQIN TECHNOLOGY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUAQIN TECHNOLOGY LTD and Shenzhen Clou 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 Shenzhen Clou Electronics are associated (or correlated) with HUAQIN TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUAQIN TECHNOLOGY LTD has no effect on the direction of Shenzhen Clou i.e., Shenzhen Clou and HUAQIN TECHNOLOGY go up and down completely randomly.

Pair Corralation between Shenzhen Clou and HUAQIN TECHNOLOGY

Assuming the 90 days trading horizon Shenzhen Clou Electronics is expected to under-perform the HUAQIN TECHNOLOGY. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Clou Electronics is 1.49 times less risky than HUAQIN TECHNOLOGY. The stock trades about -0.03 of its potential returns per unit of risk. The HUAQIN TECHNOLOGY LTD is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,591  in HUAQIN TECHNOLOGY LTD on December 26, 2024 and sell it today you would earn a total of  48.00  from holding HUAQIN TECHNOLOGY LTD or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Shenzhen Clou Electronics  vs.  HUAQIN TECHNOLOGY LTD

Shenzhen Clou Electronics

Risk-Adjusted Performance

Very Weak

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

HUAQIN TECHNOLOGY LTD

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HUAQIN TECHNOLOGY LTD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HUAQIN TECHNOLOGY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenzhen Clou and HUAQIN TECHNOLOGY

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

The idea behind Shenzhen Clou Electronics and HUAQIN TECHNOLOGY LTD 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.