Correlation Between Panda Financial and HeNan Splendor

Can any of the company-specific risk be diversified away by investing in both Panda Financial and HeNan Splendor 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 Panda Financial and HeNan Splendor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Panda Financial Holding and HeNan Splendor Science, you can compare the effects of market volatilities on Panda Financial and HeNan Splendor 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 Panda Financial with a short position of HeNan Splendor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Panda Financial and HeNan Splendor.

Diversification Opportunities for Panda Financial and HeNan Splendor

0.16

Correlation Coefficient

Panda Financial  HeNan Splendor

Average diversification

The 3 months correlation between Panda and HeNan is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Panda Financial Holding and HeNan Splendor Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeNan Splendor Science and Panda Financial 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 Panda Financial Holding are associated (or correlated) with HeNan Splendor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeNan Splendor Science has no effect on the direction of Panda Financial i.e., Panda Financial and HeNan Splendor go up and down completely randomly.

Pair Corralation between Panda Financial and HeNan Splendor

Assuming the 90 days trading horizon Panda Financial Holding is expected to under-perform the HeNan Splendor. But the stock apears to be less risky and, when comparing its historical volatility, Panda Financial Holding is 1.1 times less risky than HeNan Splendor. The stock trades about -0.17 of its potential returns per unit of risk. The HeNan Splendor Science is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,065  in HeNan Splendor Science on November 28, 2024 and sell it today you would earn a total of  64.00  from holding HeNan Splendor Science or generate 6.01% return on investment over 90 days.

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

Panda Financial Holding  vs.  HeNan Splendor Science

Panda Financial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Panda Financial Holding 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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HeNan Splendor Science

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Panda Financial and HeNan Splendor

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

The idea behind Panda Financial Holding and HeNan Splendor Science 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.