Correlation Between Hengli Petrochemical and Hangzhou EZVIZ

Can any of the company-specific risk be diversified away by investing in both Hengli Petrochemical and Hangzhou EZVIZ 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 Hengli Petrochemical and Hangzhou EZVIZ into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hengli Petrochemical Co and Hangzhou EZVIZ Network, you can compare the effects of market volatilities on Hengli Petrochemical and Hangzhou EZVIZ 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 Hengli Petrochemical with a short position of Hangzhou EZVIZ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Petrochemical and Hangzhou EZVIZ.

Diversification Opportunities for Hengli Petrochemical and Hangzhou EZVIZ

0.74

Correlation Coefficient

Hengli Petrochemical  Hangzhou EZVIZ

Poor diversification

The 3 months correlation between Hengli and Hangzhou is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Petrochemical Co and Hangzhou EZVIZ Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou EZVIZ Network and Hengli Petrochemical 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 Hengli Petrochemical Co are associated (or correlated) with Hangzhou EZVIZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou EZVIZ Network has no effect on the direction of Hengli Petrochemical i.e., Hengli Petrochemical and Hangzhou EZVIZ go up and down completely randomly.

Pair Corralation between Hengli Petrochemical and Hangzhou EZVIZ

Assuming the 90 days trading horizon Hengli Petrochemical Co is expected to generate 0.71 times more return on investment than Hangzhou EZVIZ. However, Hengli Petrochemical Co is 1.41 times less risky than Hangzhou EZVIZ. It trades about 0.11 of its potential returns per unit of risk. Hangzhou EZVIZ Network is currently generating about -0.02 per unit of risk. If you would invest  1,430  in Hengli Petrochemical Co on September 27, 2024 and sell it today you would earn a total of  96.00  from holding Hengli Petrochemical Co or generate 6.71% return on investment over 90 days.

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

Hengli Petrochemical Co  vs.  Hangzhou EZVIZ Network

Hengli Petrochemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Petrochemical Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Petrochemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hangzhou EZVIZ Network

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Hengli Petrochemical and Hangzhou EZVIZ

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

The idea behind Hengli Petrochemical Co and Hangzhou EZVIZ Network 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.