Correlation Between Cultural Investment and Hunan Investment

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

By analyzing existing cross correlation between Cultural Investment Holdings and Hunan Investment Group, you can compare the effects of market volatilities on Cultural Investment and Hunan Investment 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 Cultural Investment with a short position of Hunan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cultural Investment and Hunan Investment.

Diversification Opportunities for Cultural Investment and Hunan Investment

0.74

Correlation Coefficient

Cultural Investment  Hunan Investment

Poor diversification

The 3 months correlation between Cultural and Hunan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cultural Investment Holdings and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment and Cultural Investment 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 Cultural Investment Holdings are associated (or correlated) with Hunan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Investment has no effect on the direction of Cultural Investment i.e., Cultural Investment and Hunan Investment go up and down completely randomly.

Pair Corralation between Cultural Investment and Hunan Investment

Assuming the 90 days trading horizon Cultural Investment is expected to generate 1.55 times less return on investment than Hunan Investment. But when comparing it to its historical volatility, Cultural Investment Holdings is 1.09 times less risky than Hunan Investment. It trades about 0.16 of its potential returns per unit of risk. Hunan Investment Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Hunan Investment Group on September 13, 2024 and sell it today you would earn a total of  205.00  from holding Hunan Investment Group or generate 51.25% return on investment over 90 days.

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

Cultural Investment Holdings  vs.  Hunan Investment Group

Cultural Investment

Risk-Adjusted Performance

12 of 100

Good

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

Hunan Investment

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cultural Investment and Hunan Investment

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

The idea behind Cultural Investment Holdings and Hunan Investment Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.