Correlation Between Hsinli Chemical and Ma Kuang

Can any of the company-specific risk be diversified away by investing in both Hsinli Chemical and Ma Kuang 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 Hsinli Chemical and Ma Kuang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hsinli Chemical Industrial and Ma Kuang Healthcare, you can compare the effects of market volatilities on Hsinli Chemical and Ma Kuang 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 Hsinli Chemical with a short position of Ma Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsinli Chemical and Ma Kuang.

Diversification Opportunities for Hsinli Chemical and Ma Kuang

-0.04

Correlation Coefficient

Hsinli Chemical  Ma Kuang

Good diversification

The 3 months correlation between Hsinli and 4139 is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Hsinli Chemical Industrial and Ma Kuang Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ma Kuang Healthcare and Hsinli Chemical 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 Hsinli Chemical Industrial are associated (or correlated) with Ma Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ma Kuang Healthcare has no effect on the direction of Hsinli Chemical i.e., Hsinli Chemical and Ma Kuang go up and down completely randomly.

Pair Corralation between Hsinli Chemical and Ma Kuang

Assuming the 90 days trading horizon Hsinli Chemical Industrial is expected to generate 1.6 times more return on investment than Ma Kuang. However, Hsinli Chemical is 1.6 times more volatile than Ma Kuang Healthcare. It trades about 0.09 of its potential returns per unit of risk. Ma Kuang Healthcare is currently generating about -0.02 per unit of risk. If you would invest  1,510  in Hsinli Chemical Industrial on October 11, 2024 and sell it today you would earn a total of  3,440  from holding Hsinli Chemical Industrial or generate 227.81% return on investment over 90 days.

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

Hsinli Chemical Industrial  vs.  Ma Kuang Healthcare

Hsinli Chemical Indu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hsinli Chemical Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hsinli Chemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ma Kuang Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ma Kuang Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Hsinli Chemical and Ma Kuang

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

The idea behind Hsinli Chemical Industrial and Ma Kuang Healthcare 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.