Correlation Between Changchun Faway and Hunan Investment

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Changchun Faway 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 Changchun Faway and Hunan Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Changchun Faway Automobile and Hunan Investment Group, you can compare the effects of market volatilities on Changchun Faway 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 Changchun Faway with a short position of Hunan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun Faway and Hunan Investment.

Diversification Opportunities for Changchun Faway and Hunan Investment

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Changchun and Hunan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Changchun Faway Automobile and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment and Changchun Faway 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 Changchun Faway Automobile 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 Changchun Faway i.e., Changchun Faway and Hunan Investment go up and down completely randomly.

Pair Corralation between Changchun Faway and Hunan Investment

Assuming the 90 days trading horizon Changchun Faway is expected to generate 1.81 times less return on investment than Hunan Investment. But when comparing it to its historical volatility, Changchun Faway Automobile is 1.13 times less risky than Hunan Investment. It trades about 0.01 of its potential returns per unit of risk. Hunan Investment Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  478.00  in Hunan Investment Group on October 4, 2024 and sell it today you would earn a total of  37.00  from holding Hunan Investment Group or generate 7.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Changchun Faway Automobile  vs.  Hunan Investment Group

 Performance 
       Timeline  
Changchun Faway Auto 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Changchun Faway and Hunan Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Changchun Faway and Hunan Investment

The main advantage of trading using opposite Changchun Faway and Hunan Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changchun Faway 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 Changchun Faway Automobile 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.
Check out your portfolio center.
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

Other Complementary Tools

Piotroski F Score
Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
ETF Categories
List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities