Correlation Between Wuhan Hvsen and Guangdong Tianhe

Can any of the company-specific risk be diversified away by investing in both Wuhan Hvsen and Guangdong Tianhe 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 Wuhan Hvsen and Guangdong Tianhe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wuhan Hvsen Biotechnology and Guangdong Tianhe Agricultural, you can compare the effects of market volatilities on Wuhan Hvsen and Guangdong Tianhe 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 Wuhan Hvsen with a short position of Guangdong Tianhe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuhan Hvsen and Guangdong Tianhe.

Diversification Opportunities for Wuhan Hvsen and Guangdong Tianhe

0.73

Correlation Coefficient

Wuhan Hvsen  Guangdong Tianhe

Poor diversification

The 3 months correlation between Wuhan and Guangdong is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Hvsen Biotechnology and Guangdong Tianhe Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Tianhe Agr and Wuhan Hvsen 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 Wuhan Hvsen Biotechnology are associated (or correlated) with Guangdong Tianhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Tianhe Agr has no effect on the direction of Wuhan Hvsen i.e., Wuhan Hvsen and Guangdong Tianhe go up and down completely randomly.

Pair Corralation between Wuhan Hvsen and Guangdong Tianhe

Assuming the 90 days trading horizon Wuhan Hvsen Biotechnology is expected to generate 2.07 times more return on investment than Guangdong Tianhe. However, Wuhan Hvsen is 2.07 times more volatile than Guangdong Tianhe Agricultural. It trades about 0.18 of its potential returns per unit of risk. Guangdong Tianhe Agricultural is currently generating about 0.07 per unit of risk. If you would invest  1,037  in Wuhan Hvsen Biotechnology on December 26, 2024 and sell it today you would earn a total of  421.00  from holding Wuhan Hvsen Biotechnology or generate 40.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Wuhan Hvsen Biotechnology  vs.  Guangdong Tianhe Agricultural

Wuhan Hvsen Biotechnology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Hvsen Biotechnology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Hvsen sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Tianhe Agr

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Tianhe Agricultural are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Tianhe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wuhan Hvsen and Guangdong Tianhe

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

The idea behind Wuhan Hvsen Biotechnology and Guangdong Tianhe Agricultural 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.