Correlation Between USI Corp and Hong Tai

Can any of the company-specific risk be diversified away by investing in both USI Corp and Hong Tai 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 USI Corp and Hong Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for USI Corp and Hong Tai

0.57

Correlation Coefficient

USI Corp  Hong Tai

Very weak diversification

The 3 months correlation between USI and Hong is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding USI Corp and Hong Tai Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Tai Electric and USI Corp 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 USI Corp are associated (or correlated) with Hong Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Tai Electric has no effect on the direction of USI Corp i.e., USI Corp and Hong Tai go up and down completely randomly.

Pair Corralation between USI Corp and Hong Tai

Assuming the 90 days trading horizon USI Corp is expected to generate 2.7 times more return on investment than Hong Tai. However, USI Corp is 2.7 times more volatile than Hong Tai Electric. It trades about 0.04 of its potential returns per unit of risk. Hong Tai Electric is currently generating about 0.07 per unit of risk. If you would invest  1,095  in USI Corp on December 28, 2024 and sell it today you would earn a total of  50.00  from holding USI Corp or generate 4.57% return on investment over 90 days.

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

USI Corp  vs.  Hong Tai Electric

USI Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in USI Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, USI Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hong Tai Electric

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Tai Electric are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hong Tai 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 USI Corp and Hong Tai

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

The idea behind USI Corp and Hong Tai Electric 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.