Correlation Between EnTie Commercial and Hua Nan

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

By analyzing existing cross correlation between EnTie Commercial Bank and Hua Nan Financial, you can compare the effects of market volatilities on EnTie Commercial and Hua Nan 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 EnTie Commercial with a short position of Hua Nan. Check out your portfolio center. Please also check ongoing floating volatility patterns of EnTie Commercial and Hua Nan.

Diversification Opportunities for EnTie Commercial and Hua Nan

-0.33

Correlation Coefficient

EnTie Commercial  Hua Nan

Very good diversification

The 3 months correlation between EnTie and Hua is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding EnTie Commercial Bank and Hua Nan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Nan Financial and EnTie Commercial 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 EnTie Commercial Bank are associated (or correlated) with Hua Nan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Nan Financial has no effect on the direction of EnTie Commercial i.e., EnTie Commercial and Hua Nan go up and down completely randomly.

Pair Corralation between EnTie Commercial and Hua Nan

Assuming the 90 days trading horizon EnTie Commercial Bank is expected to under-perform the Hua Nan. In addition to that, EnTie Commercial is 1.12 times more volatile than Hua Nan Financial. It trades about -0.07 of its total potential returns per unit of risk. Hua Nan Financial is currently generating about 0.14 per unit of volatility. If you would invest  2,545  in Hua Nan Financial on October 20, 2024 and sell it today you would earn a total of  195.00  from holding Hua Nan Financial or generate 7.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

EnTie Commercial Bank  vs.  Hua Nan Financial

EnTie Commercial Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EnTie Commercial Bank 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.

Hua Nan Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Nan Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hua Nan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with EnTie Commercial and Hua Nan

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

The idea behind EnTie Commercial Bank and Hua Nan Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.