Correlation Between Harbin Hatou and Westone Information

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

By analyzing existing cross correlation between Harbin Hatou Investment and Westone Information Industry, you can compare the effects of market volatilities on Harbin Hatou and Westone Information 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 Harbin Hatou with a short position of Westone Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbin Hatou and Westone Information.

Diversification Opportunities for Harbin Hatou and Westone Information

0.86

Correlation Coefficient

Harbin Hatou  Westone Information

Very poor diversification

The 3 months correlation between Harbin and Westone is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Hatou Investment and Westone Information Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westone Information and Harbin Hatou 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 Harbin Hatou Investment are associated (or correlated) with Westone Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westone Information has no effect on the direction of Harbin Hatou i.e., Harbin Hatou and Westone Information go up and down completely randomly.

Pair Corralation between Harbin Hatou and Westone Information

Assuming the 90 days trading horizon Harbin Hatou Investment is expected to generate 2.03 times more return on investment than Westone Information. However, Harbin Hatou is 2.03 times more volatile than Westone Information Industry. It trades about 0.08 of its potential returns per unit of risk. Westone Information Industry is currently generating about -0.03 per unit of risk. If you would invest  687.00  in Harbin Hatou Investment on September 22, 2024 and sell it today you would earn a total of  37.00  from holding Harbin Hatou Investment or generate 5.39% return on investment over 90 days.

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

Harbin Hatou Investment  vs.  Westone Information Industry

Harbin Hatou Investment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Hatou Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harbin Hatou sustained solid returns over the last few months and may actually be approaching a breakup point.

Westone Information

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westone Information Industry are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westone Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harbin Hatou and Westone Information

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

The idea behind Harbin Hatou Investment and Westone Information Industry 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.