Correlation Between Hu Lane and Global PMX

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

By analyzing existing cross correlation between Hu Lane Associate and Global PMX Co, you can compare the effects of market volatilities on Hu Lane and Global PMX 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 Hu Lane with a short position of Global PMX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hu Lane and Global PMX.

Diversification Opportunities for Hu Lane and Global PMX

-0.41

Correlation Coefficient

Hu Lane  Global PMX

Very good diversification

The 3 months correlation between 6279 and Global is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hu Lane Associate and Global PMX Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global PMX and Hu Lane 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 Hu Lane Associate are associated (or correlated) with Global PMX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global PMX has no effect on the direction of Hu Lane i.e., Hu Lane and Global PMX go up and down completely randomly.

Pair Corralation between Hu Lane and Global PMX

Assuming the 90 days trading horizon Hu Lane Associate is expected to under-perform the Global PMX. But the stock apears to be less risky and, when comparing its historical volatility, Hu Lane Associate is 1.21 times less risky than Global PMX. The stock trades about -0.06 of its potential returns per unit of risk. The Global PMX Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,800  in Global PMX Co on December 27, 2024 and sell it today you would earn a total of  350.00  from holding Global PMX Co or generate 3.24% return on investment over 90 days.

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

Hu Lane Associate  vs.  Global PMX Co

Hu Lane Associate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hu Lane Associate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hu Lane is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Global PMX

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global PMX Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Global PMX 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 Hu Lane and Global PMX

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

The idea behind Hu Lane Associate and Global PMX Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.