Correlation Between Industrial and Huaxi Securities

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

By analyzing existing cross correlation between Industrial and Commercial and Huaxi Securities Co, you can compare the effects of market volatilities on Industrial and Huaxi Securities 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 Industrial with a short position of Huaxi Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Huaxi Securities.

Diversification Opportunities for Industrial and Huaxi Securities

0.03

Correlation Coefficient

Industrial  Huaxi Securities

Significant diversification

The 3 months correlation between Industrial and Huaxi is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Huaxi Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxi Securities and Industrial 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 Industrial and Commercial are associated (or correlated) with Huaxi Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxi Securities has no effect on the direction of Industrial i.e., Industrial and Huaxi Securities go up and down completely randomly.

Pair Corralation between Industrial and Huaxi Securities

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.61 times more return on investment than Huaxi Securities. However, Industrial and Commercial is 1.64 times less risky than Huaxi Securities. It trades about 0.1 of its potential returns per unit of risk. Huaxi Securities Co is currently generating about 0.01 per unit of risk. If you would invest  418.00  in Industrial and Commercial on October 5, 2024 and sell it today you would earn a total of  262.00  from holding Industrial and Commercial or generate 62.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.77%
Values	Daily Returns

Industrial and Commercial  vs.  Huaxi Securities Co

Industrial and Commercial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Huaxi Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaxi Securities Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial and Huaxi Securities

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

The idea behind Industrial and Commercial and Huaxi Securities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.