Correlation Between Vats Liquor and Huagong Tech

Can any of the company-specific risk be diversified away by investing in both Vats Liquor and Huagong Tech 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 Vats Liquor and Huagong Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vats Liquor Chain and Huagong Tech Co, you can compare the effects of market volatilities on Vats Liquor and Huagong Tech 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 Vats Liquor with a short position of Huagong Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and Huagong Tech.

Diversification Opportunities for Vats Liquor and Huagong Tech

0.45

Correlation Coefficient

Vats Liquor  Huagong Tech

Very weak diversification

The 3 months correlation between Vats and Huagong is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Huagong Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huagong Tech and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with Huagong Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huagong Tech has no effect on the direction of Vats Liquor i.e., Vats Liquor and Huagong Tech go up and down completely randomly.

Pair Corralation between Vats Liquor and Huagong Tech

Assuming the 90 days trading horizon Vats Liquor Chain is expected to under-perform the Huagong Tech. In addition to that, Vats Liquor is 1.2 times more volatile than Huagong Tech Co. It trades about -0.1 of its total potential returns per unit of risk. Huagong Tech Co is currently generating about 0.11 per unit of volatility. If you would invest  3,696  in Huagong Tech Co on October 6, 2024 and sell it today you would earn a total of  257.00  from holding Huagong Tech Co or generate 6.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Vats Liquor Chain  vs.  Huagong Tech Co

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain 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.

Huagong Tech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Huagong Tech Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huagong Tech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vats Liquor and Huagong Tech

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

The idea behind Vats Liquor Chain and Huagong Tech 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.