Correlation Between Hengdian Entertainment and Lander Sports

Can any of the company-specific risk be diversified away by investing in both Hengdian Entertainment and Lander Sports 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 Lander Sports 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 Lander Sports Development, you can compare the effects of market volatilities on Hengdian Entertainment and Lander Sports 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 Lander Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengdian Entertainment and Lander Sports.

Diversification Opportunities for Hengdian Entertainment and Lander Sports

0.73

Correlation Coefficient

Hengdian Entertainment  Lander Sports

Poor diversification

The 3 months correlation between Hengdian and Lander is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Lander Sports Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lander Sports Development 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 Lander Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lander Sports Development has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Lander Sports go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Lander Sports

Assuming the 90 days trading horizon Hengdian Entertainment Co is expected to under-perform the Lander Sports. But the stock apears to be less risky and, when comparing its historical volatility, Hengdian Entertainment Co is 2.09 times less risky than Lander Sports. The stock trades about -0.09 of its potential returns per unit of risk. The Lander Sports Development is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  332.00  in Lander Sports Development on October 4, 2024 and sell it today you would earn a total of  23.00  from holding Lander Sports Development or generate 6.93% return on investment over 90 days.

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

Hengdian Entertainment Co  vs.  Lander Sports Development

Hengdian Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengdian Entertainment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengdian Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Lander Sports Development

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lander Sports Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lander Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengdian Entertainment and Lander Sports

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

The idea behind Hengdian Entertainment Co and Lander Sports Development 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 Anywhere module to track or share privately all of your investments from the convenience of any device.