Correlation Between New Hope and Hongrun Construction

Can any of the company-specific risk be diversified away by investing in both New Hope and Hongrun Construction 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 New Hope and Hongrun Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Hope Dairy and Hongrun Construction Group, you can compare the effects of market volatilities on New Hope and Hongrun Construction 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 New Hope with a short position of Hongrun Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Hope and Hongrun Construction.

Diversification Opportunities for New Hope and Hongrun Construction

-0.01

Correlation Coefficient

New Hope  Hongrun Construction

Good diversification

The 3 months correlation between New and Hongrun is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding New Hope Dairy and Hongrun Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongrun Construction and New Hope 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 New Hope Dairy are associated (or correlated) with Hongrun Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongrun Construction has no effect on the direction of New Hope i.e., New Hope and Hongrun Construction go up and down completely randomly.

Pair Corralation between New Hope and Hongrun Construction

Assuming the 90 days trading horizon New Hope is expected to generate 1.39 times less return on investment than Hongrun Construction. In addition to that, New Hope is 1.36 times more volatile than Hongrun Construction Group. It trades about 0.02 of its total potential returns per unit of risk. Hongrun Construction Group is currently generating about 0.05 per unit of volatility. If you would invest  463.00  in Hongrun Construction Group on December 25, 2024 and sell it today you would earn a total of  22.00  from holding Hongrun Construction Group or generate 4.75% return on investment over 90 days.

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

New Hope Dairy  vs.  Hongrun Construction Group

New Hope Dairy

Risk-Adjusted Performance

Weak

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

Hongrun Construction

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hongrun Construction Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongrun Construction may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with New Hope and Hongrun Construction

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

The idea behind New Hope Dairy and Hongrun Construction 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.