Correlation Between Hwabao WP and Guangdong Ellington

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

Diversification Opportunities for Hwabao WP and Guangdong Ellington

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Hwabao and Guangdong is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hwabao WP CSI and Guangdong Ellington Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Ellington 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 Guangdong Ellington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Ellington has no effect on the direction of Hwabao WP i.e., Hwabao WP and Guangdong Ellington go up and down completely randomly.

Pair Corralation between Hwabao WP and Guangdong Ellington

Assuming the 90 days trading horizon Hwabao WP is expected to generate 5.68 times less return on investment than Guangdong Ellington. But when comparing it to its historical volatility, Hwabao WP CSI is 1.45 times less risky than Guangdong Ellington. It trades about 0.01 of its potential returns per unit of risk. Guangdong Ellington Electronics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  682.00  in Guangdong Ellington Electronics on October 7, 2024 and sell it today you would earn a total of  198.00  from holding Guangdong Ellington Electronics or generate 29.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Hwabao WP CSI  vs.  Guangdong Ellington Electronic

 Performance 
       Timeline  
Hwabao WP CSI 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Guangdong Ellington 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Guangdong Ellington Electronics 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.

Hwabao WP and Guangdong Ellington Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hwabao WP and Guangdong Ellington

The main advantage of trading using opposite Hwabao WP and Guangdong Ellington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hwabao WP position performs unexpectedly, Guangdong Ellington 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 Guangdong Ellington will offset losses from the drop in Guangdong Ellington's long position.
The idea behind Hwabao WP CSI and Guangdong Ellington Electronics 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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