Correlation Between Hengerda New and Guangzhou Haige

Can any of the company-specific risk be diversified away by investing in both Hengerda New and Guangzhou Haige 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 Hengerda New and Guangzhou Haige into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hengerda New Materials and Guangzhou Haige Communications, you can compare the effects of market volatilities on Hengerda New and Guangzhou Haige 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 Hengerda New with a short position of Guangzhou Haige. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengerda New and Guangzhou Haige.

Diversification Opportunities for Hengerda New and Guangzhou Haige

0.91

Correlation Coefficient

Hengerda New  Guangzhou Haige

Almost no diversification

The 3 months correlation between Hengerda and Guangzhou is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hengerda New Materials and Guangzhou Haige Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haige Comm and Hengerda New 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 Hengerda New Materials are associated (or correlated) with Guangzhou Haige. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haige Comm has no effect on the direction of Hengerda New i.e., Hengerda New and Guangzhou Haige go up and down completely randomly.

Pair Corralation between Hengerda New and Guangzhou Haige

Assuming the 90 days trading horizon Hengerda New is expected to generate 2.76 times less return on investment than Guangzhou Haige. In addition to that, Hengerda New is 1.26 times more volatile than Guangzhou Haige Communications. It trades about 0.01 of its total potential returns per unit of risk. Guangzhou Haige Communications is currently generating about 0.04 per unit of volatility. If you would invest  825.00  in Guangzhou Haige Communications on September 25, 2024 and sell it today you would earn a total of  324.00  from holding Guangzhou Haige Communications or generate 39.27% return on investment over 90 days.

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

Hengerda New Materials  vs.  Guangzhou Haige Communications

Hengerda New Materials

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hengerda New Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengerda New sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Haige Comm

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haige sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengerda New and Guangzhou Haige

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

The idea behind Hengerda New Materials and Guangzhou Haige Communications 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.