Correlation Between Long Bon and Huang Hsiang

Can any of the company-specific risk be diversified away by investing in both Long Bon and Huang Hsiang 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 Long Bon and Huang Hsiang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Long Bon International and Huang Hsiang Construction, you can compare the effects of market volatilities on Long Bon and Huang Hsiang 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 Long Bon with a short position of Huang Hsiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Bon and Huang Hsiang.

Diversification Opportunities for Long Bon and Huang Hsiang

-0.06

Correlation Coefficient

Long Bon  Huang Hsiang

Good diversification

The 3 months correlation between Long and Huang is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Long Bon International and Huang Hsiang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huang Hsiang Construction and Long Bon 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 Long Bon International are associated (or correlated) with Huang Hsiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huang Hsiang Construction has no effect on the direction of Long Bon i.e., Long Bon and Huang Hsiang go up and down completely randomly.

Pair Corralation between Long Bon and Huang Hsiang

Assuming the 90 days trading horizon Long Bon International is expected to generate 0.27 times more return on investment than Huang Hsiang. However, Long Bon International is 3.75 times less risky than Huang Hsiang. It trades about -0.3 of its potential returns per unit of risk. Huang Hsiang Construction is currently generating about -0.27 per unit of risk. If you would invest  2,090  in Long Bon International on September 28, 2024 and sell it today you would lose (110.00) from holding Long Bon International or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Long Bon International  vs.  Huang Hsiang Construction

Long Bon International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Bon International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Long Bon is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Huang Hsiang Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huang Hsiang Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Huang Hsiang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Long Bon and Huang Hsiang

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

The idea behind Long Bon International and Huang Hsiang Construction 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.