Correlation Between EBEST Investment and Hannong Chemicals

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

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

Diversification Opportunities for EBEST Investment and Hannong Chemicals

0.72

Correlation Coefficient

EBEST Investment  Hannong Chemicals

Poor diversification

The 3 months correlation between EBEST and Hannong is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding EBEST Investment Securities and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals and EBEST Investment 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 EBEST Investment Securities 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 EBEST Investment i.e., EBEST Investment and Hannong Chemicals go up and down completely randomly.

Pair Corralation between EBEST Investment and Hannong Chemicals

Assuming the 90 days trading horizon EBEST Investment Securities is expected to generate 0.3 times more return on investment than Hannong Chemicals. However, EBEST Investment Securities is 3.36 times less risky than Hannong Chemicals. It trades about -0.16 of its potential returns per unit of risk. Hannong Chemicals is currently generating about -0.08 per unit of risk. If you would invest  462,500  in EBEST Investment Securities on August 31, 2024 and sell it today you would lose (52,500) from holding EBEST Investment Securities or give up 11.35% of portfolio value over 90 days.

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

EBEST Investment Securities  vs.  Hannong Chemicals

EBEST Investment Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EBEST Investment Securities 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.

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with EBEST Investment and Hannong Chemicals

The main advantage of trading using opposite EBEST Investment and Hannong Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBEST Investment 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 EBEST Investment Securities 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.