Correlation Between Hunan Tyen and New Hope

Can any of the company-specific risk be diversified away by investing in both Hunan Tyen and New Hope 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 Hunan Tyen and New Hope into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Tyen Machinery and New Hope Dairy, you can compare the effects of market volatilities on Hunan Tyen and New Hope 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 Hunan Tyen with a short position of New Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Tyen and New Hope.

Diversification Opportunities for Hunan Tyen and New Hope

-0.03

Correlation Coefficient

Hunan Tyen  New Hope

Good diversification

The 3 months correlation between Hunan and New is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Tyen Machinery and New Hope Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope Dairy and Hunan Tyen 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 Hunan Tyen Machinery are associated (or correlated) with New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope Dairy has no effect on the direction of Hunan Tyen i.e., Hunan Tyen and New Hope go up and down completely randomly.

Pair Corralation between Hunan Tyen and New Hope

Assuming the 90 days trading horizon Hunan Tyen Machinery is expected to generate 1.61 times more return on investment than New Hope. However, Hunan Tyen is 1.61 times more volatile than New Hope Dairy. It trades about 0.15 of its potential returns per unit of risk. New Hope Dairy is currently generating about 0.19 per unit of risk. If you would invest  501.00  in Hunan Tyen Machinery on October 22, 2024 and sell it today you would earn a total of  51.00  from holding Hunan Tyen Machinery or generate 10.18% return on investment over 90 days.

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

Hunan Tyen Machinery  vs.  New Hope Dairy

Hunan Tyen Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Tyen Machinery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Tyen sustained solid returns over the last few months and may actually be approaching a breakup point.

New Hope Dairy

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Hunan Tyen and New Hope

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

The idea behind Hunan Tyen Machinery and New Hope Dairy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.