Correlation Between Holitech Technology and Rongsheng Petrochemical

Can any of the company-specific risk be diversified away by investing in both Holitech Technology and Rongsheng Petrochemical 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 Holitech Technology and Rongsheng Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holitech Technology Co and Rongsheng Petrochemical Co, you can compare the effects of market volatilities on Holitech Technology and Rongsheng Petrochemical 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 Holitech Technology with a short position of Rongsheng Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holitech Technology and Rongsheng Petrochemical.

Diversification Opportunities for Holitech Technology and Rongsheng Petrochemical

0.1

Correlation Coefficient

Holitech Technology  Rongsheng Petrochemical

Average diversification

The 3 months correlation between Holitech and Rongsheng is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Holitech Technology Co and Rongsheng Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongsheng Petrochemical and Holitech Technology 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 Holitech Technology Co are associated (or correlated) with Rongsheng Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongsheng Petrochemical has no effect on the direction of Holitech Technology i.e., Holitech Technology and Rongsheng Petrochemical go up and down completely randomly.

Pair Corralation between Holitech Technology and Rongsheng Petrochemical

Assuming the 90 days trading horizon Holitech Technology Co is expected to generate 2.03 times more return on investment than Rongsheng Petrochemical. However, Holitech Technology is 2.03 times more volatile than Rongsheng Petrochemical Co. It trades about 0.23 of its potential returns per unit of risk. Rongsheng Petrochemical Co is currently generating about -0.15 per unit of risk. If you would invest  133.00  in Holitech Technology Co on October 6, 2024 and sell it today you would earn a total of  83.00  from holding Holitech Technology Co or generate 62.41% return on investment over 90 days.

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

Holitech Technology Co  vs.  Rongsheng Petrochemical Co

Holitech Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Holitech Technology Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Holitech Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Rongsheng Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rongsheng Petrochemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Holitech Technology and Rongsheng Petrochemical

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

The idea behind Holitech Technology Co and Rongsheng Petrochemical 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.