Correlation Between Hsing Ta and Zero One

Can any of the company-specific risk be diversified away by investing in both Hsing Ta and Zero One 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 Zero One 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 Zero One Technology, you can compare the effects of market volatilities on Hsing Ta and Zero One 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 Zero One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsing Ta and Zero One.

Diversification Opportunities for Hsing Ta and Zero One

-0.27

Correlation Coefficient

Hsing Ta  Zero One

Very good diversification

The 3 months correlation between Hsing and Zero is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hsing Ta Cement and Zero One Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zero One Technology 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 Zero One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zero One Technology has no effect on the direction of Hsing Ta i.e., Hsing Ta and Zero One go up and down completely randomly.

Pair Corralation between Hsing Ta and Zero One

Assuming the 90 days trading horizon Hsing Ta Cement is expected to under-perform the Zero One. But the stock apears to be less risky and, when comparing its historical volatility, Hsing Ta Cement is 7.98 times less risky than Zero One. The stock trades about -0.21 of its potential returns per unit of risk. The Zero One Technology is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  9,140  in Zero One Technology on October 6, 2024 and sell it today you would earn a total of  4,060  from holding Zero One Technology or generate 44.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Hsing Ta Cement  vs.  Zero One Technology

Hsing Ta Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hsing Ta Cement has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Zero One Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zero One Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Zero One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hsing Ta and Zero One

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

The idea behind Hsing Ta Cement and Zero One Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.