Correlation Between Hwa Fong and Sentronic International

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

By analyzing existing cross correlation between Hwa Fong Rubber and Sentronic International, you can compare the effects of market volatilities on Hwa Fong and Sentronic International 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 Hwa Fong with a short position of Sentronic International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwa Fong and Sentronic International.

Diversification Opportunities for Hwa Fong and Sentronic International

0.74

Correlation Coefficient

Hwa Fong  Sentronic International

Poor diversification

The 3 months correlation between Hwa and Sentronic is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and Sentronic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentronic International and Hwa Fong 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 Hwa Fong Rubber are associated (or correlated) with Sentronic International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentronic International has no effect on the direction of Hwa Fong i.e., Hwa Fong and Sentronic International go up and down completely randomly.

Pair Corralation between Hwa Fong and Sentronic International

Assuming the 90 days trading horizon Hwa Fong is expected to generate 3.28 times less return on investment than Sentronic International. But when comparing it to its historical volatility, Hwa Fong Rubber is 2.53 times less risky than Sentronic International. It trades about 0.16 of its potential returns per unit of risk. Sentronic International is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,360  in Sentronic International on December 22, 2024 and sell it today you would earn a total of  520.00  from holding Sentronic International or generate 22.03% return on investment over 90 days.

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

Hwa Fong Rubber  vs.  Sentronic International

Hwa Fong Rubber

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hwa Fong Rubber are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hwa Fong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sentronic International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sentronic International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sentronic International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hwa Fong and Sentronic International

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

The idea behind Hwa Fong Rubber and Sentronic International 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.