Correlation Between Hua Xia and Keda Clean

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

Diversification Opportunities for Hua Xia and Keda Clean

-0.11

Correlation Coefficient

Hua Xia  Keda Clean

Good diversification

The 3 months correlation between Hua and Keda is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hua Xia Bank and Keda Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keda Clean Energy 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 Keda Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keda Clean Energy has no effect on the direction of Hua Xia i.e., Hua Xia and Keda Clean go up and down completely randomly.

Pair Corralation between Hua Xia and Keda Clean

Assuming the 90 days trading horizon Hua Xia Bank is expected to under-perform the Keda Clean. But the stock apears to be less risky and, when comparing its historical volatility, Hua Xia Bank is 1.07 times less risky than Keda Clean. The stock trades about -0.05 of its potential returns per unit of risk. The Keda Clean Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  788.00  in Keda Clean Energy on December 22, 2024 and sell it today you would earn a total of  7.00  from holding Keda Clean Energy or generate 0.89% 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.  Keda Clean Energy

Hua Xia Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hua Xia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Keda Clean Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Keda Clean Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Keda Clean 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 Keda Clean

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

The idea behind Hua Xia Bank and Keda Clean Energy 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.