Correlation Between Hua Xia and Rongan Property

Can any of the company-specific risk be diversified away by investing in both Hua Xia and Rongan Property 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 Hua Xia and Rongan Property into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hua Xia Bank and Rongan Property Co, you can compare the effects of market volatilities on Hua Xia and Rongan Property 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 Hua Xia with a short position of Rongan Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Xia and Rongan Property.

Diversification Opportunities for Hua Xia and Rongan Property

-0.14

Correlation Coefficient

Hua Xia  Rongan Property

Good diversification

The 3 months correlation between Hua and Rongan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hua Xia Bank and Rongan Property Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongan Property and Hua Xia 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 Hua Xia Bank are associated (or correlated) with Rongan Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongan Property has no effect on the direction of Hua Xia i.e., Hua Xia and Rongan Property go up and down completely randomly.

Pair Corralation between Hua Xia and Rongan Property

Assuming the 90 days trading horizon Hua Xia Bank is expected to generate 0.53 times more return on investment than Rongan Property. However, Hua Xia Bank is 1.89 times less risky than Rongan Property. It trades about 0.08 of its potential returns per unit of risk. Rongan Property Co is currently generating about -0.05 per unit of risk. If you would invest  718.00  in Hua Xia Bank on October 9, 2024 and sell it today you would earn a total of  50.00  from holding Hua Xia Bank or generate 6.96% return on investment over 90 days.

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

Hua Xia Bank  vs.  Rongan Property Co

Hua Xia Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Xia Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hua Xia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Rongan Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rongan Property Co 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.

Pair Trading with Hua Xia and Rongan Property

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

The idea behind Hua Xia Bank and Rongan Property Co 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.