Correlation Between Holy Stone and Associated Industries

Can any of the company-specific risk be diversified away by investing in both Holy Stone and Associated Industries 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 Holy Stone and Associated Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holy Stone Enterprise and Associated Industries China, you can compare the effects of market volatilities on Holy Stone and Associated Industries 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 Holy Stone with a short position of Associated Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holy Stone and Associated Industries.

Diversification Opportunities for Holy Stone and Associated Industries

0.42

Correlation Coefficient

Holy Stone  Associated Industries

Very weak diversification

The 3 months correlation between Holy and Associated is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and Associated Industries China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Industries and Holy Stone 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 Holy Stone Enterprise are associated (or correlated) with Associated Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Industries has no effect on the direction of Holy Stone i.e., Holy Stone and Associated Industries go up and down completely randomly.

Pair Corralation between Holy Stone and Associated Industries

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to under-perform the Associated Industries. But the stock apears to be less risky and, when comparing its historical volatility, Holy Stone Enterprise is 1.54 times less risky than Associated Industries. The stock trades about -0.11 of its potential returns per unit of risk. The Associated Industries China is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,210  in Associated Industries China on October 10, 2024 and sell it today you would lose (5.00) from holding Associated Industries China or give up 0.41% of portfolio value over 90 days.

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

Holy Stone Enterprise  vs.  Associated Industries China

Holy Stone Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holy Stone Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holy Stone is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Associated Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated Industries China has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Associated Industries is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Holy Stone and Associated Industries

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

The idea behind Holy Stone Enterprise and Associated Industries China 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.