Correlation Between Hong Yi and Zig Sheng

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

By analyzing existing cross correlation between Hong Yi Fiber and Zig Sheng Industrial, you can compare the effects of market volatilities on Hong Yi and Zig Sheng 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 Hong Yi with a short position of Zig Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Yi and Zig Sheng.

Diversification Opportunities for Hong Yi and Zig Sheng

0.87

Correlation Coefficient

Hong Yi  Zig Sheng

Very poor diversification

The 3 months correlation between Hong and Zig is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hong Yi Fiber and Zig Sheng Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zig Sheng Industrial and Hong Yi 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 Hong Yi Fiber are associated (or correlated) with Zig Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zig Sheng Industrial has no effect on the direction of Hong Yi i.e., Hong Yi and Zig Sheng go up and down completely randomly.

Pair Corralation between Hong Yi and Zig Sheng

Assuming the 90 days trading horizon Hong Yi Fiber is expected to generate 0.64 times more return on investment than Zig Sheng. However, Hong Yi Fiber is 1.56 times less risky than Zig Sheng. It trades about -0.13 of its potential returns per unit of risk. Zig Sheng Industrial is currently generating about -0.25 per unit of risk. If you would invest  1,685  in Hong Yi Fiber on September 17, 2024 and sell it today you would lose (95.00) from holding Hong Yi Fiber or give up 5.64% of portfolio value over 90 days.

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

Hong Yi Fiber  vs.  Zig Sheng Industrial

Hong Yi Fiber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hong Yi Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hong Yi is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Zig Sheng Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zig Sheng Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Hong Yi and Zig Sheng

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

The idea behind Hong Yi Fiber and Zig Sheng Industrial 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.