Correlation Between Humanwell Healthcare and Hongfa Technology

Can any of the company-specific risk be diversified away by investing in both Humanwell Healthcare and Hongfa Technology 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 Humanwell Healthcare and Hongfa Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Humanwell Healthcare Group and Hongfa Technology Co, you can compare the effects of market volatilities on Humanwell Healthcare and Hongfa Technology 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 Humanwell Healthcare with a short position of Hongfa Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humanwell Healthcare and Hongfa Technology.

Diversification Opportunities for Humanwell Healthcare and Hongfa Technology

0.02

Correlation Coefficient

Humanwell Healthcare  Hongfa Technology

Significant diversification

The 3 months correlation between Humanwell and Hongfa is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Humanwell Healthcare Group and Hongfa Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongfa Technology and Humanwell Healthcare 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 Humanwell Healthcare Group are associated (or correlated) with Hongfa Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongfa Technology has no effect on the direction of Humanwell Healthcare i.e., Humanwell Healthcare and Hongfa Technology go up and down completely randomly.

Pair Corralation between Humanwell Healthcare and Hongfa Technology

Assuming the 90 days trading horizon Humanwell Healthcare is expected to generate 2.52 times less return on investment than Hongfa Technology. In addition to that, Humanwell Healthcare is 1.32 times more volatile than Hongfa Technology Co. It trades about 0.02 of its total potential returns per unit of risk. Hongfa Technology Co is currently generating about 0.07 per unit of volatility. If you would invest  3,122  in Hongfa Technology Co on October 26, 2024 and sell it today you would earn a total of  219.00  from holding Hongfa Technology Co or generate 7.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Humanwell Healthcare Group  vs.  Hongfa Technology Co

Humanwell Healthcare

Risk-Adjusted Performance

1 of 100

Insignificant

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

Hongfa Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hongfa Technology Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongfa Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Humanwell Healthcare and Hongfa Technology

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

The idea behind Humanwell Healthcare Group and Hongfa Technology 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.

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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.