Correlation Between Hua Hong and PREMIER FOODS

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

Diversification Opportunities for Hua Hong and PREMIER FOODS

-0.37

Correlation Coefficient

Hua Hong  PREMIER FOODS

Very good diversification

The 3 months correlation between Hua and PREMIER is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS 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 PREMIER FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIER FOODS has no effect on the direction of Hua Hong i.e., Hua Hong and PREMIER FOODS go up and down completely randomly.

Pair Corralation between Hua Hong and PREMIER FOODS

Assuming the 90 days horizon Hua Hong is expected to generate 2.97 times less return on investment than PREMIER FOODS. In addition to that, Hua Hong is 2.69 times more volatile than PREMIER FOODS. It trades about 0.01 of its total potential returns per unit of risk. PREMIER FOODS is currently generating about 0.09 per unit of volatility. If you would invest  124.00  in PREMIER FOODS on October 26, 2024 and sell it today you would earn a total of  96.00  from holding PREMIER FOODS or generate 77.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Hua Hong Semiconductor  vs.  PREMIER FOODS

Hua Hong Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Hong Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hua Hong may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hua Hong and PREMIER FOODS

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

The idea behind Hua Hong Semiconductor and PREMIER FOODS 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.