Correlation Between Shuhua Sports and HMTNew Technical

Can any of the company-specific risk be diversified away by investing in both Shuhua Sports and HMTNew Technical 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 Shuhua Sports and HMTNew Technical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shuhua Sports Co and HMTNew Technical, you can compare the effects of market volatilities on Shuhua Sports and HMTNew Technical 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 Shuhua Sports with a short position of HMTNew Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shuhua Sports and HMTNew Technical.

Diversification Opportunities for Shuhua Sports and HMTNew Technical

0.6

Correlation Coefficient

Shuhua Sports  HMTNew Technical

Poor diversification

The 3 months correlation between Shuhua and HMTNew is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shuhua Sports Co and HMTNew Technical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMTNew Technical and Shuhua Sports 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 Shuhua Sports Co are associated (or correlated) with HMTNew Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMTNew Technical has no effect on the direction of Shuhua Sports i.e., Shuhua Sports and HMTNew Technical go up and down completely randomly.

Pair Corralation between Shuhua Sports and HMTNew Technical

Assuming the 90 days trading horizon Shuhua Sports is expected to generate 10.59 times less return on investment than HMTNew Technical. But when comparing it to its historical volatility, Shuhua Sports Co is 1.48 times less risky than HMTNew Technical. It trades about 0.01 of its potential returns per unit of risk. HMTNew Technical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,386  in HMTNew Technical on October 6, 2024 and sell it today you would earn a total of  617.00  from holding HMTNew Technical or generate 25.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Shuhua Sports Co  vs.  HMTNew Technical

Shuhua Sports

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shuhua Sports Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shuhua Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HMTNew Technical

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Shuhua Sports and HMTNew Technical

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

The idea behind Shuhua Sports Co and HMTNew Technical 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.