Correlation Between New Advanced and Hua Eng

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

By analyzing existing cross correlation between New Advanced Electronics and Hua Eng Wire, you can compare the effects of market volatilities on New Advanced and Hua Eng 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 New Advanced with a short position of Hua Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Advanced and Hua Eng.

Diversification Opportunities for New Advanced and Hua Eng

0.47

Correlation Coefficient

New Advanced  Hua Eng

Very weak diversification

The 3 months correlation between New and Hua is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding New Advanced Electronics and Hua Eng Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Eng Wire and New Advanced 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 New Advanced Electronics are associated (or correlated) with Hua Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Eng Wire has no effect on the direction of New Advanced i.e., New Advanced and Hua Eng go up and down completely randomly.

Pair Corralation between New Advanced and Hua Eng

Assuming the 90 days trading horizon New Advanced Electronics is expected to generate 0.95 times more return on investment than Hua Eng. However, New Advanced Electronics is 1.05 times less risky than Hua Eng. It trades about 0.13 of its potential returns per unit of risk. Hua Eng Wire is currently generating about 0.04 per unit of risk. If you would invest  5,350  in New Advanced Electronics on December 26, 2024 and sell it today you would earn a total of  860.00  from holding New Advanced Electronics or generate 16.07% return on investment over 90 days.

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

New Advanced Electronics  vs.  Hua Eng Wire

New Advanced Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Advanced Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, New Advanced showed solid returns over the last few months and may actually be approaching a breakup point.

Hua Eng Wire

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Eng Wire are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hua Eng 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 New Advanced and Hua Eng

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

The idea behind New Advanced Electronics and Hua Eng Wire 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.