Correlation Between Huafa Industrial and Thinkingdom Media

Can any of the company-specific risk be diversified away by investing in both Huafa Industrial and Thinkingdom Media 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 Huafa Industrial and Thinkingdom Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Huafa Industrial and Thinkingdom Media

-0.05

Correlation Coefficient

Huafa Industrial  Thinkingdom Media

Good diversification

The 3 months correlation between Huafa and Thinkingdom is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Huafa Industrial Co and Thinkingdom Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thinkingdom Media and Huafa Industrial 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 Huafa Industrial Co are associated (or correlated) with Thinkingdom Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thinkingdom Media has no effect on the direction of Huafa Industrial i.e., Huafa Industrial and Thinkingdom Media go up and down completely randomly.

Pair Corralation between Huafa Industrial and Thinkingdom Media

Assuming the 90 days trading horizon Huafa Industrial Co is expected to under-perform the Thinkingdom Media. But the stock apears to be less risky and, when comparing its historical volatility, Huafa Industrial Co is 1.51 times less risky than Thinkingdom Media. The stock trades about -0.07 of its potential returns per unit of risk. The Thinkingdom Media Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,960  in Thinkingdom Media Group on December 27, 2024 and sell it today you would lose (45.00) from holding Thinkingdom Media Group or give up 2.3% of portfolio value over 90 days.

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

Huafa Industrial Co  vs.  Thinkingdom Media Group

Huafa Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huafa Industrial 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.

Thinkingdom Media

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Huafa Industrial and Thinkingdom Media

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

The idea behind Huafa Industrial Co and Thinkingdom Media Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.