Correlation Between Hengdian Entertainment and Hunan Investment

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

By analyzing existing cross correlation between Hengdian Entertainment Co and Hunan Investment Group, you can compare the effects of market volatilities on Hengdian Entertainment and Hunan Investment 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 Hengdian Entertainment with a short position of Hunan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengdian Entertainment and Hunan Investment.

Diversification Opportunities for Hengdian Entertainment and Hunan Investment

0.83

Correlation Coefficient

Hengdian Entertainment  Hunan Investment

Very poor diversification

The 3 months correlation between Hengdian and Hunan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment and Hengdian Entertainment 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 Hengdian Entertainment Co are associated (or correlated) with Hunan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Investment has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Hunan Investment go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Hunan Investment

Assuming the 90 days trading horizon Hengdian Entertainment Co is expected to generate 1.28 times more return on investment than Hunan Investment. However, Hengdian Entertainment is 1.28 times more volatile than Hunan Investment Group. It trades about 0.02 of its potential returns per unit of risk. Hunan Investment Group is currently generating about -0.04 per unit of risk. If you would invest  1,307  in Hengdian Entertainment Co on October 8, 2024 and sell it today you would earn a total of  7.00  from holding Hengdian Entertainment Co or generate 0.54% return on investment over 90 days.

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

Hengdian Entertainment Co  vs.  Hunan Investment Group

Hengdian Entertainment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hengdian Entertainment Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hengdian Entertainment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hunan Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hunan Investment Group 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.

Pair Trading with Hengdian Entertainment and Hunan Investment

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

The idea behind Hengdian Entertainment Co and Hunan Investment Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.