Correlation Between Shenzhen Topway and Huatian Hotel

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

By analyzing existing cross correlation between Shenzhen Topway Video and Huatian Hotel Group, you can compare the effects of market volatilities on Shenzhen Topway and Huatian Hotel 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 Topway with a short position of Huatian Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Topway and Huatian Hotel.

Diversification Opportunities for Shenzhen Topway and Huatian Hotel

0.82

Correlation Coefficient

Shenzhen Topway  Huatian Hotel

Very poor diversification

The 3 months correlation between Shenzhen and Huatian is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Topway Video and Huatian Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huatian Hotel Group and Shenzhen Topway 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 Topway Video are associated (or correlated) with Huatian Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huatian Hotel Group has no effect on the direction of Shenzhen Topway i.e., Shenzhen Topway and Huatian Hotel go up and down completely randomly.

Pair Corralation between Shenzhen Topway and Huatian Hotel

Assuming the 90 days trading horizon Shenzhen Topway Video is expected to under-perform the Huatian Hotel. In addition to that, Shenzhen Topway is 1.07 times more volatile than Huatian Hotel Group. It trades about -0.04 of its total potential returns per unit of risk. Huatian Hotel Group is currently generating about -0.01 per unit of volatility. If you would invest  412.00  in Huatian Hotel Group on September 25, 2024 and sell it today you would lose (84.00) from holding Huatian Hotel Group or give up 20.39% of portfolio value over 90 days.

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

Shenzhen Topway Video  vs.  Huatian Hotel Group

Shenzhen Topway Video

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Topway Video are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Topway sustained solid returns over the last few months and may actually be approaching a breakup point.

Huatian Hotel Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Huatian Hotel Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huatian Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shenzhen Topway and Huatian Hotel

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

The idea behind Shenzhen Topway Video and Huatian Hotel Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.