Correlation Between Chinyang Hold and Hanwha Solutions

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

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

Diversification Opportunities for Chinyang Hold and Hanwha Solutions

0.16

Correlation Coefficient

Chinyang Hold  Hanwha Solutions

Average diversification

The 3 months correlation between Chinyang and Hanwha is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Chinyang Hold and Hanwha Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Solutions and Chinyang Hold 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 Chinyang Hold are associated (or correlated) with Hanwha Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Solutions has no effect on the direction of Chinyang Hold i.e., Chinyang Hold and Hanwha Solutions go up and down completely randomly.

Pair Corralation between Chinyang Hold and Hanwha Solutions

Assuming the 90 days trading horizon Chinyang Hold is expected to generate 0.34 times more return on investment than Hanwha Solutions. However, Chinyang Hold is 2.91 times less risky than Hanwha Solutions. It trades about 0.02 of its potential returns per unit of risk. Hanwha Solutions is currently generating about -0.06 per unit of risk. If you would invest  317,500  in Chinyang Hold on September 23, 2024 and sell it today you would earn a total of  1,500  from holding Chinyang Hold or generate 0.47% return on investment over 90 days.

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

Chinyang Hold  vs.  Hanwha Solutions

Chinyang Hold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinyang Hold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chinyang Hold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanwha Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Solutions 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 Chinyang Hold and Hanwha Solutions

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

The idea behind Chinyang Hold and Hanwha Solutions 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.