Correlation Between Strong H and Hiwin Technologies

Can any of the company-specific risk be diversified away by investing in both Strong H and Hiwin Technologies 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 Strong H and Hiwin Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Strong H Machinery and Hiwin Technologies Corp, you can compare the effects of market volatilities on Strong H and Hiwin Technologies 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 Strong H with a short position of Hiwin Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strong H and Hiwin Technologies.

Diversification Opportunities for Strong H and Hiwin Technologies

0.75

Correlation Coefficient

Strong H  Hiwin Technologies

Poor diversification

The 3 months correlation between Strong and Hiwin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Strong H Machinery and Hiwin Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiwin Technologies Corp and Strong H 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 Strong H Machinery are associated (or correlated) with Hiwin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiwin Technologies Corp has no effect on the direction of Strong H i.e., Strong H and Hiwin Technologies go up and down completely randomly.

Pair Corralation between Strong H and Hiwin Technologies

Assuming the 90 days trading horizon Strong H is expected to generate 6.89 times less return on investment than Hiwin Technologies. But when comparing it to its historical volatility, Strong H Machinery is 2.41 times less risky than Hiwin Technologies. It trades about 0.09 of its potential returns per unit of risk. Hiwin Technologies Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  24,600  in Hiwin Technologies Corp on October 10, 2024 and sell it today you would earn a total of  5,200  from holding Hiwin Technologies Corp or generate 21.14% return on investment over 90 days.

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

Strong H Machinery  vs.  Hiwin Technologies Corp

Strong H Machinery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strong H Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Strong H is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hiwin Technologies Corp

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Strong H and Hiwin Technologies

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

The idea behind Strong H Machinery and Hiwin Technologies 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.