Correlation Between Hengerda New and Super-Dragon Engineering

Can any of the company-specific risk be diversified away by investing in both Hengerda New and Super-Dragon Engineering 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 Super-Dragon Engineering 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 Super Dragon Engineering Plastics, you can compare the effects of market volatilities on Hengerda New and Super-Dragon Engineering 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 Super-Dragon Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengerda New and Super-Dragon Engineering.

Diversification Opportunities for Hengerda New and Super-Dragon Engineering

0.56

Correlation Coefficient

Hengerda New  Super-Dragon Engineering

Very weak diversification

The 3 months correlation between Hengerda and Super-Dragon is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hengerda New Materials and Super Dragon Engineering Plast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super-Dragon Engineering 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 Super-Dragon Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super-Dragon Engineering has no effect on the direction of Hengerda New i.e., Hengerda New and Super-Dragon Engineering go up and down completely randomly.

Pair Corralation between Hengerda New and Super-Dragon Engineering

Assuming the 90 days trading horizon Hengerda New Materials is expected to generate 1.53 times more return on investment than Super-Dragon Engineering. However, Hengerda New is 1.53 times more volatile than Super Dragon Engineering Plastics. It trades about 0.13 of its potential returns per unit of risk. Super Dragon Engineering Plastics is currently generating about 0.02 per unit of risk. If you would invest  2,731  in Hengerda New Materials on November 28, 2024 and sell it today you would earn a total of  797.00  from holding Hengerda New Materials or generate 29.18% return on investment over 90 days.

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

Hengerda New Materials  vs.  Super Dragon Engineering Plast

Hengerda New Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hengerda New Materials are ranked lower than 10 (%) 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.

Super-Dragon Engineering

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Super Dragon Engineering Plastics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Super-Dragon Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hengerda New and Super-Dragon Engineering

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

The idea behind Hengerda New Materials and Super Dragon Engineering Plastics 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.