Correlation Between Xinjiang Tianrun and Hongfa Technology

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

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

Diversification Opportunities for Xinjiang Tianrun and Hongfa Technology

0.69

Correlation Coefficient

Xinjiang Tianrun  Hongfa Technology

Poor diversification

The 3 months correlation between Xinjiang and Hongfa is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Tianrun Dairy and Hongfa Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongfa Technology and Xinjiang Tianrun 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 Xinjiang Tianrun Dairy 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 Xinjiang Tianrun i.e., Xinjiang Tianrun and Hongfa Technology go up and down completely randomly.

Pair Corralation between Xinjiang Tianrun and Hongfa Technology

Assuming the 90 days trading horizon Xinjiang Tianrun is expected to generate 1.8 times less return on investment than Hongfa Technology. In addition to that, Xinjiang Tianrun is 1.62 times more volatile than Hongfa Technology Co. It trades about 0.05 of its total potential returns per unit of risk. Hongfa Technology Co is currently generating about 0.16 per unit of volatility. If you would invest  3,108  in Hongfa Technology Co on December 26, 2024 and sell it today you would earn a total of  497.00  from holding Hongfa Technology Co or generate 15.99% return on investment over 90 days.

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

Xinjiang Tianrun Dairy  vs.  Hongfa Technology Co

Xinjiang Tianrun Dairy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Tianrun Dairy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Tianrun may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hongfa Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hongfa Technology Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongfa Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Tianrun and Hongfa Technology

The main advantage of trading using opposite Xinjiang Tianrun and Hongfa Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinjiang Tianrun 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 Xinjiang Tianrun Dairy 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.