Correlation Between SI TECH and Huaxi Securities

Can any of the company-specific risk be diversified away by investing in both SI TECH and Huaxi Securities 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 SI TECH and Huaxi Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SI TECH and Huaxi Securities

0.71

Correlation Coefficient

SI TECH  Huaxi Securities

Poor diversification

The 3 months correlation between 300608 and Huaxi is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SI TECH Information Technology and Huaxi Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxi Securities and SI TECH 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 SI TECH Information Technology are associated (or correlated) with Huaxi Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxi Securities has no effect on the direction of SI TECH i.e., SI TECH and Huaxi Securities go up and down completely randomly.

Pair Corralation between SI TECH and Huaxi Securities

Assuming the 90 days trading horizon SI TECH Information Technology is expected to generate 2.25 times more return on investment than Huaxi Securities. However, SI TECH is 2.25 times more volatile than Huaxi Securities Co. It trades about 0.03 of its potential returns per unit of risk. Huaxi Securities Co is currently generating about 0.02 per unit of risk. If you would invest  861.00  in SI TECH Information Technology on September 29, 2024 and sell it today you would earn a total of  255.00  from holding SI TECH Information Technology or generate 29.62% return on investment over 90 days.

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

SI TECH Information Technology  vs.  Huaxi Securities Co

SI TECH Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SI TECH Information 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.

Huaxi Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SI TECH and Huaxi Securities

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

The idea behind SI TECH Information Technology and Huaxi Securities 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.