Correlation Between I Components and Hannong Chemicals

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

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

Diversification Opportunities for I Components and Hannong Chemicals

-0.3

Correlation Coefficient

I Components  Hannong Chemicals

Very good diversification

The 3 months correlation between 059100 and Hannong is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding i Components Co and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals and I Components 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 i Components Co are associated (or correlated) with Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of I Components i.e., I Components and Hannong Chemicals go up and down completely randomly.

Pair Corralation between I Components and Hannong Chemicals

Assuming the 90 days trading horizon I Components is expected to generate 1.74 times less return on investment than Hannong Chemicals. But when comparing it to its historical volatility, i Components Co is 1.88 times less risky than Hannong Chemicals. It trades about 0.3 of its potential returns per unit of risk. Hannong Chemicals is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,214,947  in Hannong Chemicals on October 9, 2024 and sell it today you would earn a total of  216,053  from holding Hannong Chemicals or generate 17.78% return on investment over 90 days.

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

i Components Co  vs.  Hannong Chemicals

i Components

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in i Components Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, I Components sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with I Components and Hannong Chemicals

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

The idea behind i Components Co and Hannong Chemicals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.