Correlation Between Hu Lane and Actron Technology

Can any of the company-specific risk be diversified away by investing in both Hu Lane and Actron Technology 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 Actron Technology 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 Actron Technology, you can compare the effects of market volatilities on Hu Lane and Actron Technology 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 Actron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hu Lane and Actron Technology.

Diversification Opportunities for Hu Lane and Actron Technology

0.31

Correlation Coefficient

Hu Lane  Actron Technology

Weak diversification

The 3 months correlation between 6279 and Actron is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hu Lane Associate and Actron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Actron Technology 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 Actron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Actron Technology has no effect on the direction of Hu Lane i.e., Hu Lane and Actron Technology go up and down completely randomly.

Pair Corralation between Hu Lane and Actron Technology

Assuming the 90 days trading horizon Hu Lane Associate is expected to generate 1.13 times more return on investment than Actron Technology. However, Hu Lane is 1.13 times more volatile than Actron Technology. It trades about -0.07 of its potential returns per unit of risk. Actron Technology is currently generating about -0.1 per unit of risk. If you would invest  17,900  in Hu Lane Associate on December 28, 2024 and sell it today you would lose (1,250) from holding Hu Lane Associate or give up 6.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

Hu Lane Associate  vs.  Actron Technology

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 latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Actron Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Actron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Hu Lane and Actron Technology

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

The idea behind Hu Lane Associate and Actron Technology 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.