Correlation Between Hua Hong and MAG Silver

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

Diversification Opportunities for Hua Hong and MAG Silver

0.02

Correlation Coefficient

Hua Hong  MAG Silver

Significant diversification

The 3 months correlation between Hua and MAG is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and MAG Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG Silver Corp 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 MAG Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG Silver Corp has no effect on the direction of Hua Hong i.e., Hua Hong and MAG Silver go up and down completely randomly.

Pair Corralation between Hua Hong and MAG Silver

Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 1.27 times more return on investment than MAG Silver. However, Hua Hong is 1.27 times more volatile than MAG Silver Corp. It trades about 0.02 of its potential returns per unit of risk. MAG Silver Corp is currently generating about -0.08 per unit of risk. If you would invest  248.00  in Hua Hong Semiconductor on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Hua Hong Semiconductor or generate 0.0% return on investment over 90 days.

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

Hua Hong Semiconductor  vs.  MAG Silver Corp

Hua Hong Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hua Hong Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MAG Silver Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MAG Silver Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MAG Silver is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hua Hong and MAG Silver

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

The idea behind Hua Hong Semiconductor and MAG Silver Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.