Correlation Between Strait Innovation and Hengerda New

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

By analyzing existing cross correlation between Strait Innovation Internet and Hengerda New Materials, you can compare the effects of market volatilities on Strait Innovation and Hengerda New 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 Strait Innovation with a short position of Hengerda New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strait Innovation and Hengerda New.

Diversification Opportunities for Strait Innovation and Hengerda New

0.66

Correlation Coefficient

Strait Innovation  Hengerda New

Poor diversification

The 3 months correlation between Strait and Hengerda is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Strait Innovation Internet and Hengerda New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengerda New Materials and Strait Innovation 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 Strait Innovation Internet are associated (or correlated) with Hengerda New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengerda New Materials has no effect on the direction of Strait Innovation i.e., Strait Innovation and Hengerda New go up and down completely randomly.

Pair Corralation between Strait Innovation and Hengerda New

Assuming the 90 days trading horizon Strait Innovation Internet is expected to under-perform the Hengerda New. In addition to that, Strait Innovation is 1.37 times more volatile than Hengerda New Materials. It trades about -0.22 of its total potential returns per unit of risk. Hengerda New Materials is currently generating about -0.25 per unit of volatility. If you would invest  2,993  in Hengerda New Materials on October 12, 2024 and sell it today you would lose (440.00) from holding Hengerda New Materials or give up 14.7% of portfolio value over 90 days.

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

Strait Innovation Internet  vs.  Hengerda New Materials

Strait Innovation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strait Innovation Internet are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Strait Innovation sustained solid returns over the last few months and may actually be approaching a breakup point.

Hengerda New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hengerda New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hengerda New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Strait Innovation and Hengerda New

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

The idea behind Strait Innovation Internet and Hengerda New Materials 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.