Correlation Between Hwa Fong and Acer E

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

Diversification Opportunities for Hwa Fong and Acer E

-0.3

Correlation Coefficient

Hwa Fong  Acer E

Very good diversification

The 3 months correlation between Hwa and Acer is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and Acer E Enabling Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acer E Enabling 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 Acer E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acer E Enabling has no effect on the direction of Hwa Fong i.e., Hwa Fong and Acer E go up and down completely randomly.

Pair Corralation between Hwa Fong and Acer E

Assuming the 90 days trading horizon Hwa Fong Rubber is expected to generate 0.34 times more return on investment than Acer E. However, Hwa Fong Rubber is 2.98 times less risky than Acer E. It trades about 0.19 of its potential returns per unit of risk. Acer E Enabling Service is currently generating about -0.07 per unit of risk. If you would invest  1,795  in Hwa Fong Rubber on December 20, 2024 and sell it today you would earn a total of  135.00  from holding Hwa Fong Rubber or generate 7.52% return on investment over 90 days.

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

Hwa Fong Rubber  vs.  Acer E Enabling Service

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 15 (%) 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.

Acer E Enabling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acer E Enabling Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Hwa Fong and Acer E

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

The idea behind Hwa Fong Rubber and Acer E Enabling Service 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.