Correlation Between Epoxy Base and HUAQIN TECHNOLOGY

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

By analyzing existing cross correlation between Epoxy Base Electronic and HUAQIN TECHNOLOGY LTD, you can compare the effects of market volatilities on Epoxy Base and HUAQIN TECHNOLOGY 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 Epoxy Base with a short position of HUAQIN TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epoxy Base and HUAQIN TECHNOLOGY.

Diversification Opportunities for Epoxy Base and HUAQIN TECHNOLOGY

0.43

Correlation Coefficient

Epoxy Base  HUAQIN TECHNOLOGY

Very weak diversification

The 3 months correlation between Epoxy and HUAQIN is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Epoxy Base Electronic and HUAQIN TECHNOLOGY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUAQIN TECHNOLOGY LTD and Epoxy Base 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 Epoxy Base Electronic are associated (or correlated) with HUAQIN TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUAQIN TECHNOLOGY LTD has no effect on the direction of Epoxy Base i.e., Epoxy Base and HUAQIN TECHNOLOGY go up and down completely randomly.

Pair Corralation between Epoxy Base and HUAQIN TECHNOLOGY

Assuming the 90 days trading horizon Epoxy Base Electronic is expected to under-perform the HUAQIN TECHNOLOGY. In addition to that, Epoxy Base is 1.22 times more volatile than HUAQIN TECHNOLOGY LTD. It trades about -0.04 of its total potential returns per unit of risk. HUAQIN TECHNOLOGY LTD is currently generating about 0.07 per unit of volatility. If you would invest  6,020  in HUAQIN TECHNOLOGY LTD on October 8, 2024 and sell it today you would earn a total of  718.00  from holding HUAQIN TECHNOLOGY LTD or generate 11.93% return on investment over 90 days.

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

Epoxy Base Electronic  vs.  HUAQIN TECHNOLOGY LTD

Epoxy Base Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Epoxy Base Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HUAQIN TECHNOLOGY LTD

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUAQIN TECHNOLOGY LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HUAQIN TECHNOLOGY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Epoxy Base and HUAQIN TECHNOLOGY

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

The idea behind Epoxy Base Electronic and HUAQIN TECHNOLOGY LTD 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.