Correlation Between Hsinli Chemical and Pou Chen

Can any of the company-specific risk be diversified away by investing in both Hsinli Chemical and Pou Chen 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 Pou Chen 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 Pou Chen Corp, you can compare the effects of market volatilities on Hsinli Chemical and Pou Chen 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 Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsinli Chemical and Pou Chen.

Diversification Opportunities for Hsinli Chemical and Pou Chen

0.59

Correlation Coefficient

Hsinli Chemical  Pou Chen

Very weak diversification

The 3 months correlation between Hsinli and Pou is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hsinli Chemical Industrial and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen Corp 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 Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of Hsinli Chemical i.e., Hsinli Chemical and Pou Chen go up and down completely randomly.

Pair Corralation between Hsinli Chemical and Pou Chen

Assuming the 90 days trading horizon Hsinli Chemical is expected to generate 2.28 times less return on investment than Pou Chen. In addition to that, Hsinli Chemical is 1.9 times more volatile than Pou Chen Corp. It trades about 0.05 of its total potential returns per unit of risk. Pou Chen Corp is currently generating about 0.21 per unit of volatility. If you would invest  3,460  in Pou Chen Corp on September 16, 2024 and sell it today you would earn a total of  835.00  from holding Pou Chen Corp or generate 24.13% return on investment over 90 days.

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

Hsinli Chemical Industrial  vs.  Pou Chen Corp

Hsinli Chemical Indu

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hsinli Chemical Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hsinli Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pou Chen Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pou Chen Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pou Chen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hsinli Chemical and Pou Chen

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

The idea behind Hsinli Chemical Industrial and Pou Chen Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.