Correlation Between Hubei Forbon and Montage Technology

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

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

Diversification Opportunities for Hubei Forbon and Montage Technology

0.5

Correlation Coefficient

Hubei Forbon  Montage Technology

Very weak diversification

The 3 months correlation between Hubei and Montage is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Forbon Technology and Montage Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montage Technology and Hubei Forbon 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 Hubei Forbon Technology are associated (or correlated) with Montage Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montage Technology has no effect on the direction of Hubei Forbon i.e., Hubei Forbon and Montage Technology go up and down completely randomly.

Pair Corralation between Hubei Forbon and Montage Technology

Assuming the 90 days trading horizon Hubei Forbon is expected to generate 1.27 times less return on investment than Montage Technology. But when comparing it to its historical volatility, Hubei Forbon Technology is 1.23 times less risky than Montage Technology. It trades about 0.09 of its potential returns per unit of risk. Montage Technology Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,294  in Montage Technology Co on October 3, 2024 and sell it today you would earn a total of  1,496  from holding Montage Technology Co or generate 28.26% return on investment over 90 days.

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

Hubei Forbon Technology  vs.  Montage Technology Co

Hubei Forbon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Forbon Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Montage Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montage Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hubei Forbon and Montage Technology

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

The idea behind Hubei Forbon Technology and Montage Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.