Correlation Between Hua Xia and Jahen Household

Can any of the company-specific risk be diversified away by investing in both Hua Xia and Jahen Household 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 Jahen Household 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 Jahen Household Products, you can compare the effects of market volatilities on Hua Xia and Jahen Household 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 Jahen Household. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Xia and Jahen Household.

Diversification Opportunities for Hua Xia and Jahen Household

0.29

Correlation Coefficient

Hua Xia  Jahen Household

Modest diversification

The 3 months correlation between Hua and Jahen is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hua Xia Bank and Jahen Household Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jahen Household Products 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 Jahen Household. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jahen Household Products has no effect on the direction of Hua Xia i.e., Hua Xia and Jahen Household go up and down completely randomly.

Pair Corralation between Hua Xia and Jahen Household

Assuming the 90 days trading horizon Hua Xia Bank is expected to generate 0.33 times more return on investment than Jahen Household. However, Hua Xia Bank is 3.08 times less risky than Jahen Household. It trades about -0.17 of its potential returns per unit of risk. Jahen Household Products is currently generating about -0.07 per unit of risk. If you would invest  785.00  in Hua Xia Bank on October 22, 2024 and sell it today you would lose (31.00) from holding Hua Xia Bank or give up 3.95% of portfolio value over 90 days.

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

Hua Xia Bank  vs.  Jahen Household Products

Hua Xia Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Xia Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hua Xia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jahen Household Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jahen Household Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jahen Household is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hua Xia and Jahen Household

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

The idea behind Hua Xia Bank and Jahen Household Products 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.