Correlation Between Shining Building and Huang Hsiang

Can any of the company-specific risk be diversified away by investing in both Shining Building and Huang Hsiang 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 Shining Building and Huang Hsiang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shining Building Business and Huang Hsiang Construction, you can compare the effects of market volatilities on Shining Building and Huang Hsiang 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 Shining Building with a short position of Huang Hsiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shining Building and Huang Hsiang.

Diversification Opportunities for Shining Building and Huang Hsiang

0.72

Correlation Coefficient

Shining Building  Huang Hsiang

Poor diversification

The 3 months correlation between Shining and Huang is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shining Building Business and Huang Hsiang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huang Hsiang Construction and Shining Building 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 Shining Building Business are associated (or correlated) with Huang Hsiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huang Hsiang Construction has no effect on the direction of Shining Building i.e., Shining Building and Huang Hsiang go up and down completely randomly.

Pair Corralation between Shining Building and Huang Hsiang

Assuming the 90 days trading horizon Shining Building Business is expected to under-perform the Huang Hsiang. In addition to that, Shining Building is 1.8 times more volatile than Huang Hsiang Construction. It trades about -0.22 of its total potential returns per unit of risk. Huang Hsiang Construction is currently generating about -0.28 per unit of volatility. If you would invest  6,770  in Huang Hsiang Construction on October 10, 2024 and sell it today you would lose (550.00) from holding Huang Hsiang Construction or give up 8.12% of portfolio value over 90 days.

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

Shining Building Business  vs.  Huang Hsiang Construction

Shining Building Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shining Building Business has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shining Building is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Huang Hsiang Construction

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Huang Hsiang Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Huang Hsiang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shining Building and Huang Hsiang

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

The idea behind Shining Building Business and Huang Hsiang Construction 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.