Correlation Between Huaxia Fund and Guangzhou Haige

Can any of the company-specific risk be diversified away by investing in both Huaxia Fund and Guangzhou Haige 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 Huaxia Fund and Guangzhou Haige into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huaxia Fund Management and Guangzhou Haige Communications, you can compare the effects of market volatilities on Huaxia Fund and Guangzhou Haige 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 Huaxia Fund with a short position of Guangzhou Haige. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaxia Fund and Guangzhou Haige.

Diversification Opportunities for Huaxia Fund and Guangzhou Haige

-0.33

Correlation Coefficient

Huaxia Fund  Guangzhou Haige

Very good diversification

The 3 months correlation between Huaxia and Guangzhou is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Huaxia Fund Management and Guangzhou Haige Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haige Comm and Huaxia Fund 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 Huaxia Fund Management are associated (or correlated) with Guangzhou Haige. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haige Comm has no effect on the direction of Huaxia Fund i.e., Huaxia Fund and Guangzhou Haige go up and down completely randomly.

Pair Corralation between Huaxia Fund and Guangzhou Haige

Assuming the 90 days trading horizon Huaxia Fund is expected to generate 11.92 times less return on investment than Guangzhou Haige. But when comparing it to its historical volatility, Huaxia Fund Management is 3.44 times less risky than Guangzhou Haige. It trades about 0.06 of its potential returns per unit of risk. Guangzhou Haige Communications is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  822.00  in Guangzhou Haige Communications on September 15, 2024 and sell it today you would earn a total of  399.00  from holding Guangzhou Haige Communications or generate 48.54% return on investment over 90 days.

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

Huaxia Fund Management  vs.  Guangzhou Haige Communications

Huaxia Fund Management

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Huaxia Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Haige Comm

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haige sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaxia Fund and Guangzhou Haige

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

The idea behind Huaxia Fund Management and Guangzhou Haige Communications 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.