Correlation Between Hannong Chemicals and GiantStep

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

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

Diversification Opportunities for Hannong Chemicals and GiantStep

0.85

Correlation Coefficient

Hannong Chemicals  GiantStep

Very poor diversification

The 3 months correlation between Hannong and GiantStep is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hannong Chemicals and GiantStep Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GiantStep and Hannong Chemicals 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 Hannong Chemicals are associated (or correlated) with GiantStep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GiantStep has no effect on the direction of Hannong Chemicals i.e., Hannong Chemicals and GiantStep go up and down completely randomly.

Pair Corralation between Hannong Chemicals and GiantStep

Assuming the 90 days trading horizon Hannong Chemicals is expected to under-perform the GiantStep. But the stock apears to be less risky and, when comparing its historical volatility, Hannong Chemicals is 1.31 times less risky than GiantStep. The stock trades about -0.14 of its potential returns per unit of risk. The GiantStep Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  800,000  in GiantStep Co on October 12, 2024 and sell it today you would lose (139,000) from holding GiantStep Co or give up 17.37% of portfolio value over 90 days.

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

Hannong Chemicals  vs.  GiantStep Co

Hannong Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hannong Chemicals 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.

GiantStep

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GiantStep 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 Hannong Chemicals and GiantStep

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

The idea behind Hannong Chemicals and GiantStep 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.