Correlation Between General Plastic and Hwa Fong

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

By analyzing existing cross correlation between General Plastic Industrial and Hwa Fong Rubber, you can compare the effects of market volatilities on General Plastic and Hwa Fong 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 General Plastic with a short position of Hwa Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Plastic and Hwa Fong.

Diversification Opportunities for General Plastic and Hwa Fong

0.88

Correlation Coefficient

General Plastic  Hwa Fong

Very poor diversification

The 3 months correlation between General and Hwa is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding General Plastic Industrial and Hwa Fong Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwa Fong Rubber and General Plastic 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 General Plastic Industrial are associated (or correlated) with Hwa Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwa Fong Rubber has no effect on the direction of General Plastic i.e., General Plastic and Hwa Fong go up and down completely randomly.

Pair Corralation between General Plastic and Hwa Fong

Assuming the 90 days trading horizon General Plastic Industrial is expected to generate 2.18 times more return on investment than Hwa Fong. However, General Plastic is 2.18 times more volatile than Hwa Fong Rubber. It trades about 0.38 of its potential returns per unit of risk. Hwa Fong Rubber is currently generating about 0.36 per unit of risk. If you would invest  3,385  in General Plastic Industrial on December 4, 2024 and sell it today you would earn a total of  215.00  from holding General Plastic Industrial or generate 6.35% return on investment over 90 days.

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

General Plastic Industrial  vs.  Hwa Fong Rubber

General Plastic Indu

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Plastic Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, General Plastic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hwa Fong Rubber

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hwa Fong Rubber are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hwa Fong is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with General Plastic and Hwa Fong

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

The idea behind General Plastic Industrial and Hwa Fong Rubber 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.