Correlation Between HengFeng Information and Dongjiang Environmental

Can any of the company-specific risk be diversified away by investing in both HengFeng Information and Dongjiang Environmental 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 HengFeng Information and Dongjiang Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for HengFeng Information and Dongjiang Environmental

0.8

Correlation Coefficient

HengFeng Information  Dongjiang Environmental

Very poor diversification

The 3 months correlation between HengFeng and Dongjiang is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding HengFeng Information Technolog and Dongjiang Environmental Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongjiang Environmental and HengFeng Information 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 HengFeng Information Technology are associated (or correlated) with Dongjiang Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongjiang Environmental has no effect on the direction of HengFeng Information i.e., HengFeng Information and Dongjiang Environmental go up and down completely randomly.

Pair Corralation between HengFeng Information and Dongjiang Environmental

Assuming the 90 days trading horizon HengFeng Information Technology is expected to generate 1.7 times more return on investment than Dongjiang Environmental. However, HengFeng Information is 1.7 times more volatile than Dongjiang Environmental Co. It trades about 0.0 of its potential returns per unit of risk. Dongjiang Environmental Co is currently generating about -0.03 per unit of risk. If you would invest  1,472  in HengFeng Information Technology on October 14, 2024 and sell it today you would lose (416.00) from holding HengFeng Information Technology or give up 28.26% of portfolio value over 90 days.

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

HengFeng Information Technolog  vs.  Dongjiang Environmental Co

HengFeng Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HengFeng Information 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.

Dongjiang Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongjiang Environmental 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 HengFeng Information and Dongjiang Environmental

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

The idea behind HengFeng Information Technology and Dongjiang Environmental 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.