Correlation Between Hwabao WP and Fiberhome Telecommunicatio

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

Diversification Opportunities for Hwabao WP and Fiberhome Telecommunicatio

0.74

Correlation Coefficient

Hwabao WP  Fiberhome Telecommunicatio

Poor diversification

The 3 months correlation between Hwabao and Fiberhome is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hwabao WP CSI and Fiberhome Telecommunication Te in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberhome Telecommunicatio has no effect on the direction of Hwabao WP i.e., Hwabao WP and Fiberhome Telecommunicatio go up and down completely randomly.

Pair Corralation between Hwabao WP and Fiberhome Telecommunicatio

Assuming the 90 days trading horizon Hwabao WP is expected to generate 11.23 times less return on investment than Fiberhome Telecommunicatio. But when comparing it to its historical volatility, Hwabao WP CSI is 1.44 times less risky than Fiberhome Telecommunicatio. It trades about 0.01 of its potential returns per unit of risk. Fiberhome Telecommunication Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,724  in Fiberhome Telecommunication Technologies on October 22, 2024 and sell it today you would earn a total of  195.00  from holding Fiberhome Telecommunication Technologies or generate 11.31% 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.  Fiberhome Telecommunication Te

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.

Fiberhome Telecommunicatio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hwabao WP and Fiberhome Telecommunicatio

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

The idea behind Hwabao WP CSI and Fiberhome Telecommunication Technologies 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.