Correlation Between Datang HuaYin and FSPG Hi-Tech

Can any of the company-specific risk be diversified away by investing in both Datang HuaYin and FSPG Hi-Tech 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 Datang HuaYin and FSPG Hi-Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Datang HuaYin Electric and FSPG Hi Tech Co, you can compare the effects of market volatilities on Datang HuaYin and FSPG Hi-Tech 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 Datang HuaYin with a short position of FSPG Hi-Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang HuaYin and FSPG Hi-Tech.

Diversification Opportunities for Datang HuaYin and FSPG Hi-Tech

0.68

Correlation Coefficient

Datang HuaYin  FSPG Hi-Tech

Poor diversification

The 3 months correlation between Datang and FSPG is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Datang HuaYin Electric and FSPG Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSPG Hi Tech and Datang HuaYin 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 Datang HuaYin Electric are associated (or correlated) with FSPG Hi-Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSPG Hi Tech has no effect on the direction of Datang HuaYin i.e., Datang HuaYin and FSPG Hi-Tech go up and down completely randomly.

Pair Corralation between Datang HuaYin and FSPG Hi-Tech

Assuming the 90 days trading horizon Datang HuaYin Electric is expected to under-perform the FSPG Hi-Tech. But the stock apears to be less risky and, when comparing its historical volatility, Datang HuaYin Electric is 4.2 times less risky than FSPG Hi-Tech. The stock trades about -0.01 of its potential returns per unit of risk. The FSPG Hi Tech Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  611.00  in FSPG Hi Tech Co on December 10, 2024 and sell it today you would earn a total of  98.00  from holding FSPG Hi Tech Co or generate 16.04% return on investment over 90 days.

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

Datang HuaYin Electric  vs.  FSPG Hi Tech Co

Datang HuaYin Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Datang HuaYin Electric 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

FSPG Hi Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FSPG Hi Tech Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FSPG Hi-Tech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Datang HuaYin and FSPG Hi-Tech

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

The idea behind Datang HuaYin Electric and FSPG Hi Tech Co 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.