Correlation Between Hwabao WP and Techshine Electronics

Can any of the company-specific risk be diversified away by investing in both Hwabao WP and Techshine Electronics 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 Techshine Electronics 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 Techshine Electronics Co, you can compare the effects of market volatilities on Hwabao WP and Techshine Electronics 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 Techshine Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwabao WP and Techshine Electronics.

Diversification Opportunities for Hwabao WP and Techshine Electronics

0.84

Correlation Coefficient

Hwabao WP  Techshine Electronics

Very poor diversification

The 3 months correlation between Hwabao and Techshine is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hwabao WP CSI and Techshine Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techshine Electronics 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 Techshine Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techshine Electronics has no effect on the direction of Hwabao WP i.e., Hwabao WP and Techshine Electronics go up and down completely randomly.

Pair Corralation between Hwabao WP and Techshine Electronics

Assuming the 90 days trading horizon Hwabao WP CSI is expected to generate 0.52 times more return on investment than Techshine Electronics. However, Hwabao WP CSI is 1.9 times less risky than Techshine Electronics. It trades about -0.18 of its potential returns per unit of risk. Techshine Electronics Co is currently generating about -0.1 per unit of risk. If you would invest  132.00  in Hwabao WP CSI on October 7, 2024 and sell it today you would lose (8.00) from holding Hwabao WP CSI or give up 6.06% of portfolio value over 90 days.

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

Hwabao WP CSI  vs.  Techshine Electronics 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.

Techshine Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Techshine Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hwabao WP and Techshine Electronics

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

The idea behind Hwabao WP CSI and Techshine Electronics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.