Correlation Between HengFeng Information and Guangzhou Jointas

Can any of the company-specific risk be diversified away by investing in both HengFeng Information and Guangzhou Jointas 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 Guangzhou Jointas 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 Guangzhou Jointas Chemical, you can compare the effects of market volatilities on HengFeng Information and Guangzhou Jointas 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 Guangzhou Jointas. Check out your portfolio center. Please also check ongoing floating volatility patterns of HengFeng Information and Guangzhou Jointas.

Diversification Opportunities for HengFeng Information and Guangzhou Jointas

0.85

Correlation Coefficient

HengFeng Information  Guangzhou Jointas

Very poor diversification

The 3 months correlation between HengFeng and Guangzhou is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding HengFeng Information Technolog and Guangzhou Jointas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jointas 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 Guangzhou Jointas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jointas has no effect on the direction of HengFeng Information i.e., HengFeng Information and Guangzhou Jointas go up and down completely randomly.

Pair Corralation between HengFeng Information and Guangzhou Jointas

Assuming the 90 days trading horizon HengFeng Information Technology is expected to generate 0.94 times more return on investment than Guangzhou Jointas. However, HengFeng Information Technology is 1.07 times less risky than Guangzhou Jointas. It trades about -0.03 of its potential returns per unit of risk. Guangzhou Jointas Chemical is currently generating about -0.13 per unit of risk. If you would invest  1,289  in HengFeng Information Technology on September 26, 2024 and sell it today you would lose (44.00) from holding HengFeng Information Technology or give up 3.41% 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.  Guangzhou Jointas Chemical

HengFeng Information

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HengFeng Information Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HengFeng Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Jointas

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HengFeng Information and Guangzhou Jointas

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

The idea behind HengFeng Information Technology and Guangzhou Jointas Chemical 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.