Correlation Between Huang Hsiang and Wonderful

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

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

Diversification Opportunities for Huang Hsiang and Wonderful

0.75

Correlation Coefficient

Huang Hsiang  Wonderful

Poor diversification

The 3 months correlation between Huang and Wonderful is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Huang Hsiang Construction and Wonderful Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonderful Hi Tech and Huang Hsiang 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 Huang Hsiang Construction are associated (or correlated) with Wonderful. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonderful Hi Tech has no effect on the direction of Huang Hsiang i.e., Huang Hsiang and Wonderful go up and down completely randomly.

Pair Corralation between Huang Hsiang and Wonderful

Assuming the 90 days trading horizon Huang Hsiang Construction is expected to generate 1.0 times more return on investment than Wonderful. However, Huang Hsiang Construction is 1.0 times less risky than Wonderful. It trades about 0.09 of its potential returns per unit of risk. Wonderful Hi Tech Co is currently generating about 0.05 per unit of risk. If you would invest  6,410  in Huang Hsiang Construction on December 24, 2024 and sell it today you would earn a total of  620.00  from holding Huang Hsiang Construction or generate 9.67% return on investment over 90 days.

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

Huang Hsiang Construction  vs.  Wonderful Hi Tech Co

Huang Hsiang Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huang Hsiang Construction are ranked lower than 7 (%) 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 April 2025.

Wonderful Hi Tech

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Huang Hsiang and Wonderful

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

The idea behind Huang Hsiang Construction and Wonderful Hi Tech Co 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.