Correlation Between Hwa Fong and Yong Shun

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

Diversification Opportunities for Hwa Fong and Yong Shun

0.49

Correlation Coefficient

Hwa Fong  Yong Shun

Very weak diversification

The 3 months correlation between Hwa and Yong is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and Yong Shun Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yong Shun Chemical 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 Yong Shun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yong Shun Chemical has no effect on the direction of Hwa Fong i.e., Hwa Fong and Yong Shun go up and down completely randomly.

Pair Corralation between Hwa Fong and Yong Shun

Assuming the 90 days trading horizon Hwa Fong Rubber is expected to generate 0.87 times more return on investment than Yong Shun. However, Hwa Fong Rubber is 1.15 times less risky than Yong Shun. It trades about 0.19 of its potential returns per unit of risk. Yong Shun Chemical is currently generating about 0.07 per unit of risk. If you would invest  1,800  in Hwa Fong Rubber on December 21, 2024 and sell it today you would earn a total of  130.00  from holding Hwa Fong Rubber or generate 7.22% return on investment over 90 days.

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

Hwa Fong Rubber  vs.  Yong Shun Chemical

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 14 (%) 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.

Yong Shun Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yong Shun Chemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yong Shun is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hwa Fong and Yong Shun

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

The idea behind Hwa Fong Rubber and Yong Shun Chemical 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.