Correlation Between Global Unichip and Holy Stone

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

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

Diversification Opportunities for Global Unichip and Holy Stone

-0.76

Correlation Coefficient

Global Unichip  Holy Stone

Pay attention - limited upside

The 3 months correlation between Global and Holy is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Global Unichip Corp and Holy Stone Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holy Stone Enterprise and Global Unichip 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 Global Unichip Corp are associated (or correlated) with Holy Stone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holy Stone Enterprise has no effect on the direction of Global Unichip i.e., Global Unichip and Holy Stone go up and down completely randomly.

Pair Corralation between Global Unichip and Holy Stone

Assuming the 90 days trading horizon Global Unichip Corp is expected to under-perform the Holy Stone. In addition to that, Global Unichip is 3.53 times more volatile than Holy Stone Enterprise. It trades about -0.02 of its total potential returns per unit of risk. Holy Stone Enterprise is currently generating about -0.06 per unit of volatility. If you would invest  9,310  in Holy Stone Enterprise on October 10, 2024 and sell it today you would lose (740.00) from holding Holy Stone Enterprise or give up 7.95% of portfolio value over 90 days.

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

Global Unichip Corp  vs.  Holy Stone Enterprise

Global Unichip Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Unichip Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Global Unichip showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Global Unichip and Holy Stone

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

The idea behind Global Unichip Corp and Holy Stone Enterprise 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.