Correlation Between Hoshine Silicon and Cathay Biotech

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

Diversification Opportunities for Hoshine Silicon and Cathay Biotech

0.71

Correlation Coefficient

Hoshine Silicon  Cathay Biotech

Poor diversification

The 3 months correlation between Hoshine and Cathay is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hoshine Silicon Ind and Cathay Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Biotech 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 Cathay Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Biotech has no effect on the direction of Hoshine Silicon i.e., Hoshine Silicon and Cathay Biotech go up and down completely randomly.

Pair Corralation between Hoshine Silicon and Cathay Biotech

Assuming the 90 days trading horizon Hoshine Silicon Ind is expected to generate 0.86 times more return on investment than Cathay Biotech. However, Hoshine Silicon Ind is 1.16 times less risky than Cathay Biotech. It trades about 0.04 of its potential returns per unit of risk. Cathay Biotech is currently generating about -0.22 per unit of risk. If you would invest  5,922  in Hoshine Silicon Ind on September 20, 2024 and sell it today you would earn a total of  65.00  from holding Hoshine Silicon Ind or generate 1.1% return on investment over 90 days.

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

Hoshine Silicon Ind  vs.  Cathay Biotech

Hoshine Silicon Ind

Risk-Adjusted Performance

8 of 100

OK

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

Cathay Biotech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Biotech are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cathay Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hoshine Silicon and Cathay Biotech

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

The idea behind Hoshine Silicon Ind and Cathay Biotech 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.