Correlation Between Hengdian Entertainment and CSG Holding

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

Diversification Opportunities for Hengdian Entertainment and CSG Holding

-0.33

Correlation Coefficient

Hengdian Entertainment  CSG Holding

Very good diversification

The 3 months correlation between Hengdian and CSG is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and CSG Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSG Holding 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 CSG Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSG Holding has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and CSG Holding go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and CSG Holding

Assuming the 90 days trading horizon Hengdian Entertainment Co is expected to under-perform the CSG Holding. In addition to that, Hengdian Entertainment is 6.62 times more volatile than CSG Holding Co. It trades about -0.13 of its total potential returns per unit of risk. CSG Holding Co is currently generating about -0.29 per unit of volatility. If you would invest  230.00  in CSG Holding Co on October 22, 2024 and sell it today you would lose (6.00) from holding CSG Holding Co or give up 2.61% of portfolio value over 90 days.

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

Hengdian Entertainment Co  vs.  CSG Holding Co

Hengdian Entertainment

Risk-Adjusted Performance

4 of 100

Modest

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.

CSG Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSG Holding 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hengdian Entertainment and CSG Holding

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

The idea behind Hengdian Entertainment Co and CSG Holding 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.