Correlation Between Ping An and Hangzhou Weiguang

Can any of the company-specific risk be diversified away by investing in both Ping An and Hangzhou Weiguang 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 Ping An and Hangzhou Weiguang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and Hangzhou Weiguang Electronic, you can compare the effects of market volatilities on Ping An and Hangzhou Weiguang 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 Ping An with a short position of Hangzhou Weiguang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Hangzhou Weiguang.

Diversification Opportunities for Ping An and Hangzhou Weiguang

0.56

Correlation Coefficient

Ping An  Hangzhou Weiguang

Very weak diversification

The 3 months correlation between Ping and Hangzhou is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Hangzhou Weiguang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Weiguang and Ping An 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 Ping An Insurance are associated (or correlated) with Hangzhou Weiguang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Weiguang has no effect on the direction of Ping An i.e., Ping An and Hangzhou Weiguang go up and down completely randomly.

Pair Corralation between Ping An and Hangzhou Weiguang

Assuming the 90 days trading horizon Ping An is expected to generate 1.25 times less return on investment than Hangzhou Weiguang. In addition to that, Ping An is 1.04 times more volatile than Hangzhou Weiguang Electronic. It trades about 0.16 of its total potential returns per unit of risk. Hangzhou Weiguang Electronic is currently generating about 0.21 per unit of volatility. If you would invest  1,920  in Hangzhou Weiguang Electronic on September 13, 2024 and sell it today you would earn a total of  713.00  from holding Hangzhou Weiguang Electronic or generate 37.14% return on investment over 90 days.

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

Ping An Insurance  vs.  Hangzhou Weiguang Electronic

Ping An Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Hangzhou Weiguang

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Weiguang Electronic are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Weiguang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Hangzhou Weiguang

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

The idea behind Ping An Insurance and Hangzhou Weiguang Electronic 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.