Correlation Between Beijing HuaYuanYiTong and HanS Laser

Can any of the company-specific risk be diversified away by investing in both Beijing HuaYuanYiTong and HanS Laser 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 Beijing HuaYuanYiTong and HanS Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beijing HuaYuanYiTong Thermal and HanS Laser Tech, you can compare the effects of market volatilities on Beijing HuaYuanYiTong and HanS Laser 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 Beijing HuaYuanYiTong with a short position of HanS Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing HuaYuanYiTong and HanS Laser.

Diversification Opportunities for Beijing HuaYuanYiTong and HanS Laser

0.67

Correlation Coefficient

Beijing HuaYuanYiTong  HanS Laser

Poor diversification

The 3 months correlation between Beijing and HanS is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Beijing HuaYuanYiTong Thermal and HanS Laser Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HanS Laser Tech and Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong Thermal are associated (or correlated) with HanS Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HanS Laser Tech has no effect on the direction of Beijing HuaYuanYiTong i.e., Beijing HuaYuanYiTong and HanS Laser go up and down completely randomly.

Pair Corralation between Beijing HuaYuanYiTong and HanS Laser

Assuming the 90 days trading horizon Beijing HuaYuanYiTong Thermal is expected to under-perform the HanS Laser. But the stock apears to be less risky and, when comparing its historical volatility, Beijing HuaYuanYiTong Thermal is 1.02 times less risky than HanS Laser. The stock trades about -0.57 of its potential returns per unit of risk. The HanS Laser Tech is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  2,693  in HanS Laser Tech on October 10, 2024 and sell it today you would lose (329.00) from holding HanS Laser Tech or give up 12.22% of portfolio value over 90 days.

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

Beijing HuaYuanYiTong Thermal  vs.  HanS Laser Tech

Beijing HuaYuanYiTong

Risk-Adjusted Performance

0 of 100

Very Weak

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

HanS Laser Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Beijing HuaYuanYiTong and HanS Laser

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

The idea behind Beijing HuaYuanYiTong Thermal and HanS Laser Tech 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.