Correlation Between Focus Home and CHINA HUARONG

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Can any of the company-specific risk be diversified away by investing in both Focus Home and CHINA HUARONG 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 Focus Home and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focus Home Interactive and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on Focus Home and CHINA HUARONG 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 Focus Home with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Home and CHINA HUARONG.

Diversification Opportunities for Focus Home and CHINA HUARONG

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Focus and CHINA is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and Focus Home 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 Focus Home Interactive are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of Focus Home i.e., Focus Home and CHINA HUARONG go up and down completely randomly.

Pair Corralation between Focus Home and CHINA HUARONG

Assuming the 90 days horizon Focus Home Interactive is expected to under-perform the CHINA HUARONG. But the stock apears to be less risky and, when comparing its historical volatility, Focus Home Interactive is 12.05 times less risky than CHINA HUARONG. The stock trades about -0.09 of its potential returns per unit of risk. The CHINA HUARONG ENERHD 50 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.15  in CHINA HUARONG ENERHD 50 on October 26, 2024 and sell it today you would earn a total of  0.00  from holding CHINA HUARONG ENERHD 50 or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy94.74%
ValuesDaily Returns

Focus Home Interactive  vs.  CHINA HUARONG ENERHD 50

 Performance 
       Timeline  
Focus Home Interactive 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Focus Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
CHINA HUARONG ENERHD 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

Focus Home and CHINA HUARONG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Focus Home and CHINA HUARONG

The main advantage of trading using opposite Focus Home and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Home position performs unexpectedly, CHINA HUARONG 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 CHINA HUARONG will offset losses from the drop in CHINA HUARONG's long position.
The idea behind Focus Home Interactive and CHINA HUARONG ENERHD 50 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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