Correlation Between Wuhan Hvsen and Shandong Homey

Can any of the company-specific risk be diversified away by investing in both Wuhan Hvsen and Shandong Homey 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 Shandong Homey 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 Shandong Homey Aquatic, you can compare the effects of market volatilities on Wuhan Hvsen and Shandong Homey 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 Shandong Homey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuhan Hvsen and Shandong Homey.

Diversification Opportunities for Wuhan Hvsen and Shandong Homey

0.72

Correlation Coefficient

Wuhan Hvsen  Shandong Homey

Poor diversification

The 3 months correlation between Wuhan and Shandong is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Hvsen Biotechnology and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic 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 Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of Wuhan Hvsen i.e., Wuhan Hvsen and Shandong Homey go up and down completely randomly.

Pair Corralation between Wuhan Hvsen and Shandong Homey

Assuming the 90 days trading horizon Wuhan Hvsen Biotechnology is expected to generate 1.06 times more return on investment than Shandong Homey. However, Wuhan Hvsen is 1.06 times more volatile than Shandong Homey Aquatic. It trades about -0.09 of its potential returns per unit of risk. Shandong Homey Aquatic is currently generating about -0.11 per unit of risk. If you would invest  1,083  in Wuhan Hvsen Biotechnology on October 24, 2024 and sell it today you would lose (71.00) from holding Wuhan Hvsen Biotechnology or give up 6.56% of portfolio value over 90 days.

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

Wuhan Hvsen Biotechnology  vs.  Shandong Homey Aquatic

Wuhan Hvsen Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shandong Homey Aquatic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Homey Aquatic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Homey sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wuhan Hvsen and Shandong Homey

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

The idea behind Wuhan Hvsen Biotechnology and Shandong Homey Aquatic 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.