Correlation Between Acelon Chemicals and Honmyue Enterprise

Can any of the company-specific risk be diversified away by investing in both Acelon Chemicals and Honmyue Enterprise 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 Acelon Chemicals and Honmyue Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acelon Chemicals Fiber and Honmyue Enterprise Co, you can compare the effects of market volatilities on Acelon Chemicals and Honmyue Enterprise 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 Acelon Chemicals with a short position of Honmyue Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acelon Chemicals and Honmyue Enterprise.

Diversification Opportunities for Acelon Chemicals and Honmyue Enterprise

0.52

Correlation Coefficient

Acelon Chemicals  Honmyue Enterprise

Very weak diversification

The 3 months correlation between Acelon and Honmyue is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Acelon Chemicals Fiber and Honmyue Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honmyue Enterprise and Acelon Chemicals 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 Acelon Chemicals Fiber are associated (or correlated) with Honmyue Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honmyue Enterprise has no effect on the direction of Acelon Chemicals i.e., Acelon Chemicals and Honmyue Enterprise go up and down completely randomly.

Pair Corralation between Acelon Chemicals and Honmyue Enterprise

Assuming the 90 days trading horizon Acelon Chemicals Fiber is expected to generate 1.6 times more return on investment than Honmyue Enterprise. However, Acelon Chemicals is 1.6 times more volatile than Honmyue Enterprise Co. It trades about 0.06 of its potential returns per unit of risk. Honmyue Enterprise Co is currently generating about 0.06 per unit of risk. If you would invest  1,210  in Acelon Chemicals Fiber on September 13, 2024 and sell it today you would earn a total of  110.00  from holding Acelon Chemicals Fiber or generate 9.09% return on investment over 90 days.

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

Acelon Chemicals Fiber  vs.  Honmyue Enterprise Co

Acelon Chemicals Fiber

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Acelon Chemicals Fiber are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Acelon Chemicals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Honmyue Enterprise

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Honmyue Enterprise Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Honmyue Enterprise may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Acelon Chemicals and Honmyue Enterprise

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

The idea behind Acelon Chemicals Fiber and Honmyue Enterprise Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.