Correlation Between Hua Hong and Amazon

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

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

Diversification Opportunities for Hua Hong and Amazon

-0.36

Correlation Coefficient

Hua Hong  Amazon

Very good diversification

The 3 months correlation between Hua and Amazon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Hua Hong 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 Hua Hong Semiconductor are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Hua Hong i.e., Hua Hong and Amazon go up and down completely randomly.

Pair Corralation between Hua Hong and Amazon

Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 3.2 times more return on investment than Amazon. However, Hua Hong is 3.2 times more volatile than Amazon Inc. It trades about 0.22 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.22 per unit of risk. If you would invest  254.00  in Hua Hong Semiconductor on December 19, 2024 and sell it today you would earn a total of  194.00  from holding Hua Hong Semiconductor or generate 76.38% return on investment over 90 days.

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

Hua Hong Semiconductor  vs.  Amazon Inc

Hua Hong Semiconductor

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Hong Semiconductor are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hua Hong reported solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hua Hong and Amazon

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

The idea behind Hua Hong Semiconductor and Amazon Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.