Correlation Between Hwabao WP and Goke Microelectronics

Can any of the company-specific risk be diversified away by investing in both Hwabao WP and Goke Microelectronics 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 Hwabao WP and Goke Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hwabao WP CSI and Goke Microelectronics Co, you can compare the effects of market volatilities on Hwabao WP and Goke Microelectronics 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 Hwabao WP with a short position of Goke Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwabao WP and Goke Microelectronics.

Diversification Opportunities for Hwabao WP and Goke Microelectronics

0.64

Correlation Coefficient

Hwabao WP  Goke Microelectronics

Poor diversification

The 3 months correlation between Hwabao and Goke is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hwabao WP CSI and Goke Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goke Microelectronics and Hwabao WP 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 Hwabao WP CSI are associated (or correlated) with Goke Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goke Microelectronics has no effect on the direction of Hwabao WP i.e., Hwabao WP and Goke Microelectronics go up and down completely randomly.

Pair Corralation between Hwabao WP and Goke Microelectronics

Assuming the 90 days trading horizon Hwabao WP CSI is expected to generate 0.65 times more return on investment than Goke Microelectronics. However, Hwabao WP CSI is 1.53 times less risky than Goke Microelectronics. It trades about 0.01 of its potential returns per unit of risk. Goke Microelectronics Co is currently generating about -0.07 per unit of risk. If you would invest  129.00  in Hwabao WP CSI on October 22, 2024 and sell it today you would earn a total of  0.00  from holding Hwabao WP CSI or generate 0.0% return on investment over 90 days.

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

Hwabao WP CSI  vs.  Goke Microelectronics Co

Hwabao WP CSI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwabao WP CSI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hwabao WP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goke Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goke Microelectronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hwabao WP and Goke Microelectronics

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

The idea behind Hwabao WP CSI and Goke Microelectronics Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.