Correlation Between Hefei Metalforming and Sieyuan Electric

Can any of the company-specific risk be diversified away by investing in both Hefei Metalforming and Sieyuan Electric 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 Sieyuan Electric 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 Sieyuan Electric Co, you can compare the effects of market volatilities on Hefei Metalforming and Sieyuan Electric 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 Sieyuan Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hefei Metalforming and Sieyuan Electric.

Diversification Opportunities for Hefei Metalforming and Sieyuan Electric

0.47

Correlation Coefficient

Hefei Metalforming  Sieyuan Electric

Very weak diversification

The 3 months correlation between Hefei and Sieyuan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hefei Metalforming Mach and Sieyuan Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sieyuan Electric 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 Sieyuan Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sieyuan Electric has no effect on the direction of Hefei Metalforming i.e., Hefei Metalforming and Sieyuan Electric go up and down completely randomly.

Pair Corralation between Hefei Metalforming and Sieyuan Electric

Assuming the 90 days trading horizon Hefei Metalforming Mach is expected to under-perform the Sieyuan Electric. In addition to that, Hefei Metalforming is 1.73 times more volatile than Sieyuan Electric Co. It trades about -0.01 of its total potential returns per unit of risk. Sieyuan Electric Co is currently generating about 0.04 per unit of volatility. If you would invest  7,602  in Sieyuan Electric Co on October 24, 2024 and sell it today you would earn a total of  263.00  from holding Sieyuan Electric Co or generate 3.46% return on investment over 90 days.

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

Hefei Metalforming Mach  vs.  Sieyuan Electric Co

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.

Sieyuan Electric

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sieyuan Electric Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sieyuan Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hefei Metalforming and Sieyuan Electric

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

The idea behind Hefei Metalforming Mach and Sieyuan Electric 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.