Correlation Between Hongfa Technology and Jiangnan Mould

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

By analyzing existing cross correlation between Hongfa Technology Co and Jiangnan Mould Plastic, you can compare the effects of market volatilities on Hongfa Technology and Jiangnan Mould 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 Hongfa Technology with a short position of Jiangnan Mould. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongfa Technology and Jiangnan Mould.

Diversification Opportunities for Hongfa Technology and Jiangnan Mould

0.84

Correlation Coefficient

Hongfa Technology  Jiangnan Mould

Very poor diversification

The 3 months correlation between Hongfa and Jiangnan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hongfa Technology Co and Jiangnan Mould Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangnan Mould Plastic and Hongfa Technology 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 Hongfa Technology Co are associated (or correlated) with Jiangnan Mould. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangnan Mould Plastic has no effect on the direction of Hongfa Technology i.e., Hongfa Technology and Jiangnan Mould go up and down completely randomly.

Pair Corralation between Hongfa Technology and Jiangnan Mould

Assuming the 90 days trading horizon Hongfa Technology is expected to generate 1.49 times less return on investment than Jiangnan Mould. But when comparing it to its historical volatility, Hongfa Technology Co is 1.23 times less risky than Jiangnan Mould. It trades about 0.14 of its potential returns per unit of risk. Jiangnan Mould Plastic is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  566.00  in Jiangnan Mould Plastic on September 5, 2024 and sell it today you would earn a total of  184.00  from holding Jiangnan Mould Plastic or generate 32.51% return on investment over 90 days.

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

Hongfa Technology Co  vs.  Jiangnan Mould Plastic

Hongfa Technology

Risk-Adjusted Performance

10 of 100

OK

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

Jiangnan Mould Plastic

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangnan Mould Plastic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangnan Mould sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hongfa Technology and Jiangnan Mould

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

The idea behind Hongfa Technology Co and Jiangnan Mould Plastic 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.