Correlation Between Long Yuan and Hoshine Silicon

Can any of the company-specific risk be diversified away by investing in both Long Yuan and Hoshine Silicon 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 Long Yuan and Hoshine Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Long Yuan Construction and Hoshine Silicon Ind, you can compare the effects of market volatilities on Long Yuan and Hoshine Silicon 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 Long Yuan with a short position of Hoshine Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Yuan and Hoshine Silicon.

Diversification Opportunities for Long Yuan and Hoshine Silicon

0.83

Correlation Coefficient

Long Yuan  Hoshine Silicon

Very poor diversification

The 3 months correlation between Long and Hoshine is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Long Yuan Construction and Hoshine Silicon Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoshine Silicon Ind and Long Yuan 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 Long Yuan Construction are associated (or correlated) with Hoshine Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoshine Silicon Ind has no effect on the direction of Long Yuan i.e., Long Yuan and Hoshine Silicon go up and down completely randomly.

Pair Corralation between Long Yuan and Hoshine Silicon

Assuming the 90 days trading horizon Long Yuan Construction is expected to generate 1.66 times more return on investment than Hoshine Silicon. However, Long Yuan is 1.66 times more volatile than Hoshine Silicon Ind. It trades about 0.0 of its potential returns per unit of risk. Hoshine Silicon Ind is currently generating about -0.11 per unit of risk. If you would invest  414.00  in Long Yuan Construction on December 2, 2024 and sell it today you would lose (10.00) from holding Long Yuan Construction or give up 2.42% of portfolio value over 90 days.

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

Long Yuan Construction  vs.  Hoshine Silicon Ind

Long Yuan Construction

Risk-Adjusted Performance

Very Weak

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

Hoshine Silicon Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hoshine Silicon Ind 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.

Pair Trading with Long Yuan and Hoshine Silicon

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

The idea behind Long Yuan Construction and Hoshine Silicon Ind 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.