Correlation Between Hefei Metalforming and Aerospace

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

By analyzing existing cross correlation between Hefei Metalforming Mach and Aerospace Hi Tech Holding, you can compare the effects of market volatilities on Hefei Metalforming and Aerospace 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 Hefei Metalforming with a short position of Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hefei Metalforming and Aerospace.

Diversification Opportunities for Hefei Metalforming and Aerospace

0.61

Correlation Coefficient

Hefei Metalforming  Aerospace

Poor diversification

The 3 months correlation between Hefei and Aerospace is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hefei Metalforming Mach and Aerospace Hi Tech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Hi Tech and Hefei Metalforming 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 Hefei Metalforming Mach are associated (or correlated) with Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Hi Tech has no effect on the direction of Hefei Metalforming i.e., Hefei Metalforming and Aerospace go up and down completely randomly.

Pair Corralation between Hefei Metalforming and Aerospace

Assuming the 90 days trading horizon Hefei Metalforming Mach is expected to generate 1.03 times more return on investment than Aerospace. However, Hefei Metalforming is 1.03 times more volatile than Aerospace Hi Tech Holding. It trades about -0.02 of its potential returns per unit of risk. Aerospace Hi Tech Holding is currently generating about -0.07 per unit of risk. If you would invest  707.00  in Hefei Metalforming Mach on October 8, 2024 and sell it today you would lose (64.00) from holding Hefei Metalforming Mach or give up 9.05% of portfolio value over 90 days.

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

Hefei Metalforming Mach  vs.  Aerospace Hi Tech Holding

Hefei Metalforming Mach

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hefei Metalforming Mach has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hefei Metalforming is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aerospace Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerospace Hi Tech Holding 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 Hefei Metalforming and Aerospace

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

The idea behind Hefei Metalforming Mach and Aerospace Hi Tech Holding 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.