Correlation Between Hengerda New and Orinko Advanced

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

Diversification Opportunities for Hengerda New and Orinko Advanced

0.88

Correlation Coefficient

Hengerda New  Orinko Advanced

Very poor diversification

The 3 months correlation between Hengerda and Orinko is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hengerda New Materials and Orinko Advanced Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orinko Advanced Plastics 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 Orinko Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orinko Advanced Plastics has no effect on the direction of Hengerda New i.e., Hengerda New and Orinko Advanced go up and down completely randomly.

Pair Corralation between Hengerda New and Orinko Advanced

Assuming the 90 days trading horizon Hengerda New is expected to generate 1.53 times less return on investment than Orinko Advanced. In addition to that, Hengerda New is 1.21 times more volatile than Orinko Advanced Plastics. It trades about 0.02 of its total potential returns per unit of risk. Orinko Advanced Plastics is currently generating about 0.03 per unit of volatility. If you would invest  829.00  in Orinko Advanced Plastics on September 20, 2024 and sell it today you would earn a total of  213.00  from holding Orinko Advanced Plastics or generate 25.69% return on investment over 90 days.

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

Hengerda New Materials  vs.  Orinko Advanced Plastics

Hengerda New Materials

Risk-Adjusted Performance

10 of 100

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.

Orinko Advanced Plastics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orinko Advanced Plastics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orinko Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengerda New and Orinko Advanced

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

The idea behind Hengerda New Materials and Orinko Advanced 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.