Correlation Between Hengdian Entertainment and Amlogic Shanghai

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

Diversification Opportunities for Hengdian Entertainment and Amlogic Shanghai

0.59

Correlation Coefficient

Hengdian Entertainment  Amlogic Shanghai

Very weak diversification

The 3 months correlation between Hengdian and Amlogic is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Amlogic Shanghai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amlogic Shanghai 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 Amlogic Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amlogic Shanghai has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Amlogic Shanghai go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Amlogic Shanghai

Assuming the 90 days trading horizon Hengdian Entertainment is expected to generate 1.07 times less return on investment than Amlogic Shanghai. But when comparing it to its historical volatility, Hengdian Entertainment Co is 1.04 times less risky than Amlogic Shanghai. It trades about 0.02 of its potential returns per unit of risk. Amlogic Shanghai Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,051  in Amlogic Shanghai Co on September 20, 2024 and sell it today you would earn a total of  500.00  from holding Amlogic Shanghai Co or generate 7.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Hengdian Entertainment Co  vs.  Amlogic Shanghai Co

Hengdian Entertainment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hengdian Entertainment Co are ranked lower than 16 (%) 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.

Amlogic Shanghai

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amlogic Shanghai Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amlogic Shanghai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hengdian Entertainment and Amlogic Shanghai

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

The idea behind Hengdian Entertainment Co and Amlogic Shanghai 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.