Correlation Between Shandong Homey and Hi Trend

Can any of the company-specific risk be diversified away by investing in both Shandong Homey and Hi Trend 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 Shandong Homey and Hi Trend into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Homey Aquatic and Hi Trend TechCo, you can compare the effects of market volatilities on Shandong Homey and Hi Trend 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 Shandong Homey with a short position of Hi Trend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Homey and Hi Trend.

Diversification Opportunities for Shandong Homey and Hi Trend

0.72

Correlation Coefficient

Shandong Homey  Hi Trend

Poor diversification

The 3 months correlation between Shandong and 688391 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Homey Aquatic and Hi Trend TechCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Trend TechCo and Shandong Homey 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 Shandong Homey Aquatic are associated (or correlated) with Hi Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Trend TechCo has no effect on the direction of Shandong Homey i.e., Shandong Homey and Hi Trend go up and down completely randomly.

Pair Corralation between Shandong Homey and Hi Trend

Assuming the 90 days trading horizon Shandong Homey Aquatic is expected to under-perform the Hi Trend. In addition to that, Shandong Homey is 1.34 times more volatile than Hi Trend TechCo. It trades about -0.07 of its total potential returns per unit of risk. Hi Trend TechCo is currently generating about -0.03 per unit of volatility. If you would invest  3,239  in Hi Trend TechCo on December 4, 2024 and sell it today you would lose (156.00) from holding Hi Trend TechCo or give up 4.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Shandong Homey Aquatic  vs.  Hi Trend TechCo

Shandong Homey Aquatic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Homey Aquatic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hi Trend TechCo

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shandong Homey and Hi Trend

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

The idea behind Shandong Homey Aquatic and Hi Trend TechCo 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.