Correlation Between Keli Sensing and Hubei Huaqiang

Can any of the company-specific risk be diversified away by investing in both Keli Sensing and Hubei Huaqiang 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 Keli Sensing and Hubei Huaqiang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keli Sensing Technology and Hubei Huaqiang High Tech, you can compare the effects of market volatilities on Keli Sensing and Hubei Huaqiang 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 Keli Sensing with a short position of Hubei Huaqiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keli Sensing and Hubei Huaqiang.

Diversification Opportunities for Keli Sensing and Hubei Huaqiang

0.05

Correlation Coefficient

Keli Sensing  Hubei Huaqiang

Significant diversification

The 3 months correlation between Keli and Hubei is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Keli Sensing Technology and Hubei Huaqiang High Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Huaqiang High and Keli Sensing 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 Keli Sensing Technology are associated (or correlated) with Hubei Huaqiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Huaqiang High has no effect on the direction of Keli Sensing i.e., Keli Sensing and Hubei Huaqiang go up and down completely randomly.

Pair Corralation between Keli Sensing and Hubei Huaqiang

Assuming the 90 days trading horizon Keli Sensing Technology is expected to generate 1.57 times more return on investment than Hubei Huaqiang. However, Keli Sensing is 1.57 times more volatile than Hubei Huaqiang High Tech. It trades about 0.16 of its potential returns per unit of risk. Hubei Huaqiang High Tech is currently generating about 0.03 per unit of risk. If you would invest  5,360  in Keli Sensing Technology on December 1, 2024 and sell it today you would earn a total of  2,553  from holding Keli Sensing Technology or generate 47.63% return on investment over 90 days.

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

Keli Sensing Technology  vs.  Hubei Huaqiang High Tech

Keli Sensing Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Keli Sensing Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keli Sensing sustained solid returns over the last few months and may actually be approaching a breakup point.

Hubei Huaqiang High

Risk-Adjusted Performance

Weak

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

Pair Trading with Keli Sensing and Hubei Huaqiang

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

The idea behind Keli Sensing Technology and Hubei Huaqiang High Tech 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.