Correlation Between Hongfa Technology and Humanwell Healthcare

Can any of the company-specific risk be diversified away by investing in both Hongfa Technology and Humanwell Healthcare 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 Humanwell Healthcare 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 Humanwell Healthcare Group, you can compare the effects of market volatilities on Hongfa Technology and Humanwell Healthcare 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 Humanwell Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongfa Technology and Humanwell Healthcare.

Diversification Opportunities for Hongfa Technology and Humanwell Healthcare

-0.64

Correlation Coefficient

Hongfa Technology  Humanwell Healthcare

Excellent diversification

The 3 months correlation between Hongfa and Humanwell is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hongfa Technology Co and Humanwell Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humanwell Healthcare 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 Humanwell Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humanwell Healthcare has no effect on the direction of Hongfa Technology i.e., Hongfa Technology and Humanwell Healthcare go up and down completely randomly.

Pair Corralation between Hongfa Technology and Humanwell Healthcare

Assuming the 90 days trading horizon Hongfa Technology Co is expected to generate 0.82 times more return on investment than Humanwell Healthcare. However, Hongfa Technology Co is 1.22 times less risky than Humanwell Healthcare. It trades about 0.16 of its potential returns per unit of risk. Humanwell Healthcare Group is currently generating about -0.13 per unit of risk. If you would invest  3,108  in Hongfa Technology Co on December 26, 2024 and sell it today you would earn a total of  497.00  from holding Hongfa Technology Co or generate 15.99% return on investment over 90 days.

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

Hongfa Technology Co  vs.  Humanwell Healthcare Group

Hongfa Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hongfa Technology Co are ranked lower than 12 (%) 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.

Humanwell Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Humanwell Healthcare Group 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.

Pair Trading with Hongfa Technology and Humanwell Healthcare

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

The idea behind Hongfa Technology Co and Humanwell Healthcare 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 CEOs Directory module to screen CEOs from public companies around the world.