Correlation Between Hoshine Silicon and Lingyuan Iron

Can any of the company-specific risk be diversified away by investing in both Hoshine Silicon and Lingyuan Iron 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 Lingyuan Iron 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 Lingyuan Iron Steel, you can compare the effects of market volatilities on Hoshine Silicon and Lingyuan Iron 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 Lingyuan Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoshine Silicon and Lingyuan Iron.

Diversification Opportunities for Hoshine Silicon and Lingyuan Iron

0.81

Correlation Coefficient

Hoshine Silicon  Lingyuan Iron

Very poor diversification

The 3 months correlation between Hoshine and Lingyuan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hoshine Silicon Ind and Lingyuan Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lingyuan Iron Steel 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 Lingyuan Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lingyuan Iron Steel has no effect on the direction of Hoshine Silicon i.e., Hoshine Silicon and Lingyuan Iron go up and down completely randomly.

Pair Corralation between Hoshine Silicon and Lingyuan Iron

Assuming the 90 days trading horizon Hoshine Silicon Ind is expected to generate 0.61 times more return on investment than Lingyuan Iron. However, Hoshine Silicon Ind is 1.65 times less risky than Lingyuan Iron. It trades about -0.11 of its potential returns per unit of risk. Lingyuan Iron Steel is currently generating about -0.09 per unit of risk. If you would invest  5,968  in Hoshine Silicon Ind on December 2, 2024 and sell it today you would lose (575.00) from holding Hoshine Silicon Ind or give up 9.63% of portfolio value over 90 days.

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

Hoshine Silicon Ind  vs.  Lingyuan Iron Steel

Hoshine Silicon Ind

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lingyuan Iron Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lingyuan Iron Steel 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hoshine Silicon and Lingyuan Iron

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

The idea behind Hoshine Silicon Ind and Lingyuan Iron Steel 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.