Correlation Between Lens Technology and HaiXin Foods

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

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

Diversification Opportunities for Lens Technology and HaiXin Foods

0.28

Correlation Coefficient

Lens Technology  HaiXin Foods

Modest diversification

The 3 months correlation between Lens and HaiXin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lens Technology Co and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods and Lens Technology 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 Lens Technology Co are associated (or correlated) with HaiXin Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HaiXin Foods has no effect on the direction of Lens Technology i.e., Lens Technology and HaiXin Foods go up and down completely randomly.

Pair Corralation between Lens Technology and HaiXin Foods

Assuming the 90 days trading horizon Lens Technology Co is expected to generate 0.94 times more return on investment than HaiXin Foods. However, Lens Technology Co is 1.06 times less risky than HaiXin Foods. It trades about 0.07 of its potential returns per unit of risk. HaiXin Foods Co is currently generating about -0.01 per unit of risk. If you would invest  1,016  in Lens Technology Co on October 4, 2024 and sell it today you would earn a total of  1,174  from holding Lens Technology Co or generate 115.55% return on investment over 90 days.

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

Lens Technology Co  vs.  HaiXin Foods Co

Lens Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lens 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.

HaiXin Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HaiXin Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lens Technology and HaiXin Foods

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

The idea behind Lens Technology Co and HaiXin Foods 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.