Correlation Between Hwabao WP and Biwin Storage

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

Diversification Opportunities for Hwabao WP and Biwin Storage

0.7

Correlation Coefficient

Hwabao WP  Biwin Storage

Poor diversification

The 3 months correlation between Hwabao and Biwin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hwabao WP CSI and Biwin Storage Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biwin Storage Technology 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 Biwin Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biwin Storage Technology has no effect on the direction of Hwabao WP i.e., Hwabao WP and Biwin Storage go up and down completely randomly.

Pair Corralation between Hwabao WP and Biwin Storage

Assuming the 90 days trading horizon Hwabao WP CSI is expected to under-perform the Biwin Storage. But the etf apears to be less risky and, when comparing its historical volatility, Hwabao WP CSI is 1.88 times less risky than Biwin Storage. The etf trades about -0.03 of its potential returns per unit of risk. The Biwin Storage Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,028  in Biwin Storage Technology on December 26, 2024 and sell it today you would lose (78.00) from holding Biwin Storage Technology or give up 1.11% of portfolio value over 90 days.

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

Hwabao WP CSI  vs.  Biwin Storage Technology

Hwabao WP CSI

Risk-Adjusted Performance

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.

Biwin Storage Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hwabao WP and Biwin Storage

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

The idea behind Hwabao WP CSI and Biwin Storage 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.