Correlation Between Linewell Software and Hangzhou Huawang

Can any of the company-specific risk be diversified away by investing in both Linewell Software and Hangzhou Huawang 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 Linewell Software and Hangzhou Huawang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Linewell Software Co and Hangzhou Huawang New, you can compare the effects of market volatilities on Linewell Software and Hangzhou Huawang 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 Linewell Software with a short position of Hangzhou Huawang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linewell Software and Hangzhou Huawang.

Diversification Opportunities for Linewell Software and Hangzhou Huawang

-0.03

Correlation Coefficient

Linewell Software  Hangzhou Huawang

Good diversification

The 3 months correlation between Linewell and Hangzhou is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Linewell Software Co and Hangzhou Huawang New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Huawang New and Linewell Software 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 Linewell Software Co are associated (or correlated) with Hangzhou Huawang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Huawang New has no effect on the direction of Linewell Software i.e., Linewell Software and Hangzhou Huawang go up and down completely randomly.

Pair Corralation between Linewell Software and Hangzhou Huawang

Assuming the 90 days trading horizon Linewell Software Co is expected to under-perform the Hangzhou Huawang. In addition to that, Linewell Software is 1.05 times more volatile than Hangzhou Huawang New. It trades about -0.31 of its total potential returns per unit of risk. Hangzhou Huawang New is currently generating about -0.05 per unit of volatility. If you would invest  1,311  in Hangzhou Huawang New on October 11, 2024 and sell it today you would lose (35.00) from holding Hangzhou Huawang New or give up 2.67% of portfolio value over 90 days.

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

Linewell Software Co  vs.  Hangzhou Huawang New

Linewell Software

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Linewell Software Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Linewell Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hangzhou Huawang New

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Linewell Software and Hangzhou Huawang

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

The idea behind Linewell Software Co and Hangzhou Huawang New 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.