Correlation Between Hoshine Silicon and Henan Shenhuo

Can any of the company-specific risk be diversified away by investing in both Hoshine Silicon and Henan Shenhuo 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 Hoshine Silicon and Henan Shenhuo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hoshine Silicon Ind and Henan Shenhuo Coal, you can compare the effects of market volatilities on Hoshine Silicon and Henan Shenhuo 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 Hoshine Silicon with a short position of Henan Shenhuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoshine Silicon and Henan Shenhuo.

Diversification Opportunities for Hoshine Silicon and Henan Shenhuo

-0.17

Correlation Coefficient

Hoshine Silicon  Henan Shenhuo

Good diversification

The 3 months correlation between Hoshine and Henan is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hoshine Silicon Ind and Henan Shenhuo Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henan Shenhuo Coal and Hoshine Silicon 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 Hoshine Silicon Ind are associated (or correlated) with Henan Shenhuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henan Shenhuo Coal has no effect on the direction of Hoshine Silicon i.e., Hoshine Silicon and Henan Shenhuo go up and down completely randomly.

Pair Corralation between Hoshine Silicon and Henan Shenhuo

Assuming the 90 days trading horizon Hoshine Silicon is expected to generate 2.61 times less return on investment than Henan Shenhuo. But when comparing it to its historical volatility, Hoshine Silicon Ind is 1.05 times less risky than Henan Shenhuo. It trades about 0.01 of its potential returns per unit of risk. Henan Shenhuo Coal is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,829  in Henan Shenhuo Coal on October 20, 2024 and sell it today you would earn a total of  48.00  from holding Henan Shenhuo Coal or generate 2.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Hoshine Silicon Ind  vs.  Henan Shenhuo Coal

Hoshine Silicon Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoshine Silicon Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hoshine Silicon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Henan Shenhuo Coal

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Hoshine Silicon and Henan Shenhuo

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

The idea behind Hoshine Silicon Ind and Henan Shenhuo Coal 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.