Correlation Between Hangzhou Huawang and Hangzhou Zhongya

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

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

Diversification Opportunities for Hangzhou Huawang and Hangzhou Zhongya

0.52

Correlation Coefficient

Hangzhou Huawang  Hangzhou Zhongya

Very weak diversification

The 3 months correlation between Hangzhou and Hangzhou is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Huawang New and Hangzhou Zhongya Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Zhongya Mac and Hangzhou Huawang 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 Hangzhou Huawang New are associated (or correlated) with Hangzhou Zhongya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Zhongya Mac has no effect on the direction of Hangzhou Huawang i.e., Hangzhou Huawang and Hangzhou Zhongya go up and down completely randomly.

Pair Corralation between Hangzhou Huawang and Hangzhou Zhongya

Assuming the 90 days trading horizon Hangzhou Huawang New is expected to generate 0.71 times more return on investment than Hangzhou Zhongya. However, Hangzhou Huawang New is 1.4 times less risky than Hangzhou Zhongya. It trades about 0.15 of its potential returns per unit of risk. Hangzhou Zhongya Machinery is currently generating about -0.22 per unit of risk. If you would invest  1,308  in Hangzhou Huawang New on October 1, 2024 and sell it today you would earn a total of  72.00  from holding Hangzhou Huawang New or generate 5.5% return on investment over 90 days.

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

Hangzhou Huawang New  vs.  Hangzhou Zhongya Machinery

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.

Hangzhou Zhongya Mac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Zhongya Machinery 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.

Pair Trading with Hangzhou Huawang and Hangzhou Zhongya

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

The idea behind Hangzhou Huawang New and Hangzhou Zhongya Machinery 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.