Correlation Between Hengdian Entertainment and Sany Heavy

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

Diversification Opportunities for Hengdian Entertainment and Sany Heavy

0.89

Correlation Coefficient

Hengdian Entertainment  Sany Heavy

Very poor diversification

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

Pair Corralation between Hengdian Entertainment and Sany Heavy

Assuming the 90 days trading horizon Hengdian Entertainment Co is expected to generate 1.89 times more return on investment than Sany Heavy. However, Hengdian Entertainment is 1.89 times more volatile than Sany Heavy Energy. It trades about 0.14 of its potential returns per unit of risk. Sany Heavy Energy is currently generating about 0.09 per unit of risk. If you would invest  1,269  in Hengdian Entertainment Co on October 1, 2024 and sell it today you would earn a total of  282.00  from holding Hengdian Entertainment Co or generate 22.22% 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.  Sany Heavy Energy

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.

Sany Heavy Energy

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sany Heavy Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sany Heavy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hengdian Entertainment and Sany Heavy

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

The idea behind Hengdian Entertainment Co and Sany Heavy Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.