Correlation Between Hang Xiao and Dongguan Chitwing

Can any of the company-specific risk be diversified away by investing in both Hang Xiao and Dongguan Chitwing 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 Hang Xiao and Dongguan Chitwing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hang Xiao Steel and Dongguan Chitwing Technology, you can compare the effects of market volatilities on Hang Xiao and Dongguan Chitwing 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 Hang Xiao with a short position of Dongguan Chitwing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Xiao and Dongguan Chitwing.

Diversification Opportunities for Hang Xiao and Dongguan Chitwing

0.81

Correlation Coefficient

Hang Xiao  Dongguan Chitwing

Very poor diversification

The 3 months correlation between Hang and Dongguan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hang Xiao Steel and Dongguan Chitwing Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Chitwing and Hang Xiao 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 Hang Xiao Steel are associated (or correlated) with Dongguan Chitwing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Chitwing has no effect on the direction of Hang Xiao i.e., Hang Xiao and Dongguan Chitwing go up and down completely randomly.

Pair Corralation between Hang Xiao and Dongguan Chitwing

Assuming the 90 days trading horizon Hang Xiao Steel is expected to generate 1.06 times more return on investment than Dongguan Chitwing. However, Hang Xiao is 1.06 times more volatile than Dongguan Chitwing Technology. It trades about 0.22 of its potential returns per unit of risk. Dongguan Chitwing Technology is currently generating about 0.17 per unit of risk. If you would invest  247.00  in Hang Xiao Steel on December 4, 2024 and sell it today you would earn a total of  41.00  from holding Hang Xiao Steel or generate 16.6% return on investment over 90 days.

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

Hang Xiao Steel  vs.  Dongguan Chitwing Technology

Hang Xiao Steel

Risk-Adjusted Performance

Weak

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

Dongguan Chitwing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dongguan Chitwing Technology 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.

Pair Trading with Hang Xiao and Dongguan Chitwing

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

The idea behind Hang Xiao Steel and Dongguan Chitwing Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.