Correlation Between Hubei Xingfa and Piotech

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Can any of the company-specific risk be diversified away by investing in both Hubei Xingfa and Piotech 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 Hubei Xingfa and Piotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hubei Xingfa Chemicals and Piotech Inc A, you can compare the effects of market volatilities on Hubei Xingfa and Piotech 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 Hubei Xingfa with a short position of Piotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Xingfa and Piotech.

Diversification Opportunities for Hubei Xingfa and Piotech

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hubei and Piotech is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Xingfa Chemicals and Piotech Inc A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piotech Inc A and Hubei Xingfa 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 Hubei Xingfa Chemicals are associated (or correlated) with Piotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piotech Inc A has no effect on the direction of Hubei Xingfa i.e., Hubei Xingfa and Piotech go up and down completely randomly.

Pair Corralation between Hubei Xingfa and Piotech

Assuming the 90 days trading horizon Hubei Xingfa Chemicals is expected to under-perform the Piotech. But the stock apears to be less risky and, when comparing its historical volatility, Hubei Xingfa Chemicals is 1.89 times less risky than Piotech. The stock trades about -0.02 of its potential returns per unit of risk. The Piotech Inc A is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  17,948  in Piotech Inc A on October 10, 2024 and sell it today you would lose (3,130) from holding Piotech Inc A or give up 17.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Hubei Xingfa Chemicals  vs.  Piotech Inc A

 Performance 
       Timeline  
Hubei Xingfa Chemicals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hubei Xingfa Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hubei Xingfa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Piotech Inc A 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Piotech Inc A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Piotech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hubei Xingfa and Piotech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hubei Xingfa and Piotech

The main advantage of trading using opposite Hubei Xingfa and Piotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hubei Xingfa position performs unexpectedly, Piotech 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 Piotech will offset losses from the drop in Piotech's long position.
The idea behind Hubei Xingfa Chemicals and Piotech Inc A 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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