Correlation Between INKON Life and Hengdian Entertainment

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

By analyzing existing cross correlation between INKON Life Technology and Hengdian Entertainment Co, you can compare the effects of market volatilities on INKON Life and Hengdian Entertainment 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 INKON Life with a short position of Hengdian Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of INKON Life and Hengdian Entertainment.

Diversification Opportunities for INKON Life and Hengdian Entertainment

0.09

Correlation Coefficient

INKON Life  Hengdian Entertainment

Significant diversification

The 3 months correlation between INKON and Hengdian is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding INKON Life Technology and Hengdian Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengdian Entertainment and INKON Life 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 INKON Life Technology are associated (or correlated) with Hengdian Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengdian Entertainment has no effect on the direction of INKON Life i.e., INKON Life and Hengdian Entertainment go up and down completely randomly.

Pair Corralation between INKON Life and Hengdian Entertainment

Assuming the 90 days trading horizon INKON Life Technology is expected to under-perform the Hengdian Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, INKON Life Technology is 1.75 times less risky than Hengdian Entertainment. The stock trades about -0.14 of its potential returns per unit of risk. The Hengdian Entertainment Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,285  in Hengdian Entertainment Co on October 27, 2024 and sell it today you would earn a total of  209.00  from holding Hengdian Entertainment Co or generate 16.26% return on investment over 90 days.

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

INKON Life Technology  vs.  Hengdian Entertainment Co

INKON Life Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INKON Life Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hengdian Entertainment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hengdian Entertainment Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengdian Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INKON Life and Hengdian Entertainment

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

The idea behind INKON Life Technology and Hengdian Entertainment 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.