Correlation Between U Ming and Hong Tai

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

By analyzing existing cross correlation between U Ming Marine Transport and Hong Tai Electric, you can compare the effects of market volatilities on U Ming and Hong Tai 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 U Ming with a short position of Hong Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Hong Tai.

Diversification Opportunities for U Ming and Hong Tai

0.46

Correlation Coefficient

U Ming  Hong Tai

Very weak diversification

The 3 months correlation between 2606 and Hong is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Hong Tai Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Tai Electric and U Ming 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 U Ming Marine Transport are associated (or correlated) with Hong Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Tai Electric has no effect on the direction of U Ming i.e., U Ming and Hong Tai go up and down completely randomly.

Pair Corralation between U Ming and Hong Tai

Assuming the 90 days trading horizon U Ming Marine Transport is expected to generate 0.85 times more return on investment than Hong Tai. However, U Ming Marine Transport is 1.18 times less risky than Hong Tai. It trades about 0.13 of its potential returns per unit of risk. Hong Tai Electric is currently generating about 0.04 per unit of risk. If you would invest  5,180  in U Ming Marine Transport on September 15, 2024 and sell it today you would earn a total of  540.00  from holding U Ming Marine Transport or generate 10.42% return on investment over 90 days.

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

U Ming Marine Transport  vs.  Hong Tai Electric

U Ming Marine

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hong Tai Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Tai Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hong Tai 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 U Ming and Hong Tai

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

The idea behind U Ming Marine Transport and Hong Tai Electric 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.