Correlation Between Hsing Ta and Universal Cement

Can any of the company-specific risk be diversified away by investing in both Hsing Ta and Universal Cement 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 Hsing Ta and Universal Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hsing Ta Cement and Universal Cement Corp, you can compare the effects of market volatilities on Hsing Ta and Universal Cement 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 Hsing Ta with a short position of Universal Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsing Ta and Universal Cement.

Diversification Opportunities for Hsing Ta and Universal Cement

0.69

Correlation Coefficient

Hsing Ta  Universal Cement

Poor diversification

The 3 months correlation between Hsing and Universal is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hsing Ta Cement and Universal Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Cement Corp and Hsing Ta 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 Hsing Ta Cement are associated (or correlated) with Universal Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Cement Corp has no effect on the direction of Hsing Ta i.e., Hsing Ta and Universal Cement go up and down completely randomly.

Pair Corralation between Hsing Ta and Universal Cement

Assuming the 90 days trading horizon Hsing Ta Cement is expected to generate 0.68 times more return on investment than Universal Cement. However, Hsing Ta Cement is 1.48 times less risky than Universal Cement. It trades about 0.03 of its potential returns per unit of risk. Universal Cement Corp is currently generating about -0.25 per unit of risk. If you would invest  1,850  in Hsing Ta Cement on September 5, 2024 and sell it today you would earn a total of  5.00  from holding Hsing Ta Cement or generate 0.27% return on investment over 90 days.

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

Hsing Ta Cement  vs.  Universal Cement Corp

Hsing Ta Cement

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hsing Ta Cement are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hsing Ta is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Universal Cement Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Cement Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal Cement is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hsing Ta and Universal Cement

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

The idea behind Hsing Ta Cement and Universal Cement Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.