Correlation Between LARGAN Precision and Hwang Chang

Can any of the company-specific risk be diversified away by investing in both LARGAN Precision and Hwang Chang 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 LARGAN Precision and Hwang Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LARGAN Precision Co and Hwang Chang General, you can compare the effects of market volatilities on LARGAN Precision and Hwang Chang 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 LARGAN Precision with a short position of Hwang Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of LARGAN Precision and Hwang Chang.

Diversification Opportunities for LARGAN Precision and Hwang Chang

-0.54

Correlation Coefficient

LARGAN Precision  Hwang Chang

Excellent diversification

The 3 months correlation between LARGAN and Hwang is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co and Hwang Chang General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwang Chang General and LARGAN Precision 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 LARGAN Precision Co are associated (or correlated) with Hwang Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwang Chang General has no effect on the direction of LARGAN Precision i.e., LARGAN Precision and Hwang Chang go up and down completely randomly.

Pair Corralation between LARGAN Precision and Hwang Chang

Assuming the 90 days trading horizon LARGAN Precision is expected to generate 2.22 times less return on investment than Hwang Chang. But when comparing it to its historical volatility, LARGAN Precision Co is 1.79 times less risky than Hwang Chang. It trades about 0.3 of its potential returns per unit of risk. Hwang Chang General is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  6,750  in Hwang Chang General on October 9, 2024 and sell it today you would earn a total of  1,540  from holding Hwang Chang General or generate 22.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LARGAN Precision Co  vs.  Hwang Chang General

LARGAN Precision

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LARGAN Precision Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LARGAN Precision may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hwang Chang General

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwang Chang General has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with LARGAN Precision and Hwang Chang

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

The idea behind LARGAN Precision Co and Hwang Chang General 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.