Correlation Between Hua Hong and STRAYER EDUCATION

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

Diversification Opportunities for Hua Hong and STRAYER EDUCATION

-0.42

Correlation Coefficient

Hua Hong  STRAYER EDUCATION

Very good diversification

The 3 months correlation between Hua and STRAYER is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and STRAYER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAYER EDUCATION 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 STRAYER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAYER EDUCATION has no effect on the direction of Hua Hong i.e., Hua Hong and STRAYER EDUCATION go up and down completely randomly.

Pair Corralation between Hua Hong and STRAYER EDUCATION

Assuming the 90 days horizon Hua Hong is expected to generate 5.48 times less return on investment than STRAYER EDUCATION. In addition to that, Hua Hong is 1.84 times more volatile than STRAYER EDUCATION. It trades about 0.0 of its total potential returns per unit of risk. STRAYER EDUCATION is currently generating about 0.03 per unit of volatility. If you would invest  7,506  in STRAYER EDUCATION on October 10, 2024 and sell it today you would earn a total of  1,294  from holding STRAYER EDUCATION or generate 17.24% return on investment over 90 days.

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

Hua Hong Semiconductor  vs.  STRAYER EDUCATION

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 uncertain 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.

STRAYER EDUCATION

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAYER EDUCATION are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, STRAYER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hua Hong and STRAYER EDUCATION

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

The idea behind Hua Hong Semiconductor and STRAYER EDUCATION 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.