Correlation Between Hangzhou Prevail and Puyang Huicheng

Can any of the company-specific risk be diversified away by investing in both Hangzhou Prevail and Puyang Huicheng 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 Hangzhou Prevail and Puyang Huicheng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hangzhou Prevail Optoelectronic and Puyang Huicheng Electronic, you can compare the effects of market volatilities on Hangzhou Prevail and Puyang Huicheng 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 Hangzhou Prevail with a short position of Puyang Huicheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Prevail and Puyang Huicheng.

Diversification Opportunities for Hangzhou Prevail and Puyang Huicheng

0.85

Correlation Coefficient

Hangzhou Prevail  Puyang Huicheng

Very poor diversification

The 3 months correlation between Hangzhou and Puyang is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Prevail Optoelectroni and Puyang Huicheng Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puyang Huicheng Elec and Hangzhou Prevail 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 Hangzhou Prevail Optoelectronic are associated (or correlated) with Puyang Huicheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puyang Huicheng Elec has no effect on the direction of Hangzhou Prevail i.e., Hangzhou Prevail and Puyang Huicheng go up and down completely randomly.

Pair Corralation between Hangzhou Prevail and Puyang Huicheng

Assuming the 90 days trading horizon Hangzhou Prevail Optoelectronic is expected to under-perform the Puyang Huicheng. In addition to that, Hangzhou Prevail is 1.3 times more volatile than Puyang Huicheng Electronic. It trades about -0.06 of its total potential returns per unit of risk. Puyang Huicheng Electronic is currently generating about -0.05 per unit of volatility. If you would invest  1,629  in Puyang Huicheng Electronic on November 29, 2024 and sell it today you would lose (116.00) from holding Puyang Huicheng Electronic or give up 7.12% of portfolio value over 90 days.

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

Hangzhou Prevail Optoelectroni  vs.  Puyang Huicheng Electronic

Hangzhou Prevail Opt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hangzhou Prevail Optoelectronic 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.

Puyang Huicheng Elec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Puyang Huicheng Electronic 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 Hangzhou Prevail and Puyang Huicheng

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

The idea behind Hangzhou Prevail Optoelectronic and Puyang Huicheng Electronic 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.