Correlation Between Hengdian Entertainment and Gifore Agricultural

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

Diversification Opportunities for Hengdian Entertainment and Gifore Agricultural

0.89

Correlation Coefficient

Hengdian Entertainment  Gifore Agricultural

Very poor diversification

The 3 months correlation between Hengdian and Gifore is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Gifore Agricultural Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gifore Agricultural 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 Gifore Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gifore Agricultural has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Gifore Agricultural go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Gifore Agricultural

Assuming the 90 days trading horizon Hengdian Entertainment is expected to generate 1.19 times less return on investment than Gifore Agricultural. In addition to that, Hengdian Entertainment is 1.1 times more volatile than Gifore Agricultural Machinery. It trades about 0.02 of its total potential returns per unit of risk. Gifore Agricultural Machinery is currently generating about 0.03 per unit of volatility. If you would invest  478.00  in Gifore Agricultural Machinery on September 28, 2024 and sell it today you would earn a total of  81.00  from holding Gifore Agricultural Machinery or generate 16.95% 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.  Gifore Agricultural Machinery

Hengdian Entertainment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hengdian Entertainment Co are ranked lower than 7 (%) 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.

Gifore Agricultural

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gifore Agricultural Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gifore Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengdian Entertainment and Gifore Agricultural

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

The idea behind Hengdian Entertainment Co and Gifore Agricultural Machinery 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.