Correlation Between H FARM and Xinhua Winshare

Can any of the company-specific risk be diversified away by investing in both H FARM and Xinhua Winshare 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 H FARM and Xinhua Winshare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H FARM SPA and Xinhua Winshare Publishing, you can compare the effects of market volatilities on H FARM and Xinhua Winshare 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 H FARM with a short position of Xinhua Winshare. Check out your portfolio center. Please also check ongoing floating volatility patterns of H FARM and Xinhua Winshare.

Diversification Opportunities for H FARM and Xinhua Winshare

-0.65

Correlation Coefficient

H FARM  Xinhua Winshare

Excellent diversification

The 3 months correlation between 5JQ and Xinhua is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA and Xinhua Winshare Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinhua Winshare Publ and H FARM 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 H FARM SPA are associated (or correlated) with Xinhua Winshare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinhua Winshare Publ has no effect on the direction of H FARM i.e., H FARM and Xinhua Winshare go up and down completely randomly.

Pair Corralation between H FARM and Xinhua Winshare

Assuming the 90 days horizon H FARM SPA is expected to under-perform the Xinhua Winshare. In addition to that, H FARM is 1.4 times more volatile than Xinhua Winshare Publishing. It trades about -0.01 of its total potential returns per unit of risk. Xinhua Winshare Publishing is currently generating about 0.22 per unit of volatility. If you would invest  86.00  in Xinhua Winshare Publishing on September 14, 2024 and sell it today you would earn a total of  42.00  from holding Xinhua Winshare Publishing or generate 48.84% return on investment over 90 days.

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

H FARM SPA  vs.  Xinhua Winshare Publishing

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H FARM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xinhua Winshare Publ

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinhua Winshare Publishing are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xinhua Winshare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with H FARM and Xinhua Winshare

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

The idea behind H FARM SPA and Xinhua Winshare Publishing 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.