Correlation Between Yingde Greatchem and Hangzhou Huawang

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

By analyzing existing cross correlation between Yingde Greatchem Chemicals and Hangzhou Huawang New, you can compare the effects of market volatilities on Yingde Greatchem and Hangzhou Huawang 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 Yingde Greatchem with a short position of Hangzhou Huawang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Hangzhou Huawang.

Diversification Opportunities for Yingde Greatchem and Hangzhou Huawang

-0.06

Correlation Coefficient

Yingde Greatchem  Hangzhou Huawang

Good diversification

The 3 months correlation between Yingde and Hangzhou is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Hangzhou Huawang New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Huawang New and Yingde Greatchem 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 Yingde Greatchem Chemicals are associated (or correlated) with Hangzhou Huawang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Huawang New has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Hangzhou Huawang go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Hangzhou Huawang

Assuming the 90 days trading horizon Yingde Greatchem Chemicals is expected to generate 1.06 times more return on investment than Hangzhou Huawang. However, Yingde Greatchem is 1.06 times more volatile than Hangzhou Huawang New. It trades about 0.0 of its potential returns per unit of risk. Hangzhou Huawang New is currently generating about -0.03 per unit of risk. If you would invest  2,300  in Yingde Greatchem Chemicals on October 11, 2024 and sell it today you would lose (20.00) from holding Yingde Greatchem Chemicals or give up 0.87% of portfolio value over 90 days.

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

Yingde Greatchem Chemicals  vs.  Hangzhou Huawang New

Yingde Greatchem Che

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hangzhou Huawang New

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yingde Greatchem and Hangzhou Huawang

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

The idea behind Yingde Greatchem Chemicals and Hangzhou Huawang New 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.