Correlation Between Hwabao WP and Hygon Information

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

Diversification Opportunities for Hwabao WP and Hygon Information

0.21

Correlation Coefficient

Hwabao WP  Hygon Information

Modest diversification

The 3 months correlation between Hwabao and Hygon is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hwabao WP CSI and Hygon Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hygon Information 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 Hygon Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hygon Information has no effect on the direction of Hwabao WP i.e., Hwabao WP and Hygon Information go up and down completely randomly.

Pair Corralation between Hwabao WP and Hygon Information

Assuming the 90 days trading horizon Hwabao WP is expected to generate 5.77 times less return on investment than Hygon Information. But when comparing it to its historical volatility, Hwabao WP CSI is 1.83 times less risky than Hygon Information. It trades about 0.01 of its potential returns per unit of risk. Hygon Information Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12,811  in Hygon Information Technology on October 22, 2024 and sell it today you would earn a total of  367.00  from holding Hygon Information Technology or generate 2.86% return on investment over 90 days.

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

Hwabao WP CSI  vs.  Hygon Information Technology

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.

Hygon Information

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hygon Information Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hygon Information may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hwabao WP and Hygon Information

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

The idea behind Hwabao WP CSI and Hygon Information Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.