Correlation Between Hengdian Entertainment and Ciwen Media

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

Diversification Opportunities for Hengdian Entertainment and Ciwen Media

0.29

Correlation Coefficient

Hengdian Entertainment  Ciwen Media

Modest diversification

The 3 months correlation between Hengdian and Ciwen is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Ciwen Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciwen Media 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 Ciwen Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciwen Media has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Ciwen Media go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Ciwen Media

Assuming the 90 days trading horizon Hengdian Entertainment Co is expected to under-perform the Ciwen Media. In addition to that, Hengdian Entertainment is 1.07 times more volatile than Ciwen Media Co. It trades about -0.07 of its total potential returns per unit of risk. Ciwen Media Co is currently generating about 0.05 per unit of volatility. If you would invest  636.00  in Ciwen Media Co on December 26, 2024 and sell it today you would earn a total of  42.00  from holding Ciwen Media Co or generate 6.6% return on investment over 90 days.

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

Hengdian Entertainment Co  vs.  Ciwen Media Co

Hengdian Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hengdian Entertainment Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ciwen Media

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ciwen Media Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ciwen Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hengdian Entertainment and Ciwen Media

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

The idea behind Hengdian Entertainment Co and Ciwen Media 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.