Correlation Between Keyang Electric and Humax Holdings

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

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

Diversification Opportunities for Keyang Electric and Humax Holdings

0.35

Correlation Coefficient

Keyang Electric  Humax Holdings

Weak diversification

The 3 months correlation between Keyang and Humax is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Keyang Electric Machinery and Humax Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humax Holdings and Keyang Electric 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 Keyang Electric Machinery are associated (or correlated) with Humax Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humax Holdings has no effect on the direction of Keyang Electric i.e., Keyang Electric and Humax Holdings go up and down completely randomly.

Pair Corralation between Keyang Electric and Humax Holdings

Assuming the 90 days trading horizon Keyang Electric Machinery is expected to generate 0.74 times more return on investment than Humax Holdings. However, Keyang Electric Machinery is 1.35 times less risky than Humax Holdings. It trades about -0.07 of its potential returns per unit of risk. Humax Holdings Co is currently generating about -0.15 per unit of risk. If you would invest  387,500  in Keyang Electric Machinery on September 15, 2024 and sell it today you would lose (45,500) from holding Keyang Electric Machinery or give up 11.74% of portfolio value over 90 days.

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

Keyang Electric Machinery  vs.  Humax Holdings Co

Keyang Electric Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keyang Electric Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Humax Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humax Holdings 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Keyang Electric and Humax Holdings

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

The idea behind Keyang Electric Machinery and Humax Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.