Correlation Between Hengyuan Refining and Binasat Communications

Can any of the company-specific risk be diversified away by investing in both Hengyuan Refining and Binasat Communications 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 Hengyuan Refining and Binasat Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hengyuan Refining and Binasat Communications Bhd, you can compare the effects of market volatilities on Hengyuan Refining and Binasat Communications 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 Hengyuan Refining with a short position of Binasat Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengyuan Refining and Binasat Communications.

Diversification Opportunities for Hengyuan Refining and Binasat Communications

-0.47

Correlation Coefficient

Hengyuan Refining  Binasat Communications

Very good diversification

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

Pair Corralation between Hengyuan Refining and Binasat Communications

Assuming the 90 days trading horizon Hengyuan Refining is expected to generate 1.81 times more return on investment than Binasat Communications. However, Hengyuan Refining is 1.81 times more volatile than Binasat Communications Bhd. It trades about 0.05 of its potential returns per unit of risk. Binasat Communications Bhd is currently generating about -0.02 per unit of risk. If you would invest  200.00  in Hengyuan Refining on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Hengyuan Refining or generate 8.5% return on investment over 90 days.

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

Hengyuan Refining  vs.  Binasat Communications Bhd

Hengyuan Refining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengyuan Refining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Hengyuan Refining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Binasat Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Binasat Communications Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Binasat Communications is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Hengyuan Refining and Binasat Communications

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

The idea behind Hengyuan Refining and Binasat Communications Bhd 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.