Correlation Between AAEON Technology and Hwa Fong

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

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

Diversification Opportunities for AAEON Technology and Hwa Fong

0.84

Correlation Coefficient

AAEON Technology  Hwa Fong

Very poor diversification

The 3 months correlation between AAEON and Hwa is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding AAEON Technology 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 AAEON Technology 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 AAEON Technology 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 AAEON Technology i.e., AAEON Technology and Hwa Fong go up and down completely randomly.

Pair Corralation between AAEON Technology and Hwa Fong

Assuming the 90 days trading horizon AAEON Technology is expected to generate 1.8 times more return on investment than Hwa Fong. However, AAEON Technology is 1.8 times more volatile than Hwa Fong Rubber. It trades about 0.15 of its potential returns per unit of risk. Hwa Fong Rubber is currently generating about 0.22 per unit of risk. If you would invest  11,750  in AAEON Technology on September 15, 2024 and sell it today you would earn a total of  500.00  from holding AAEON Technology or generate 4.26% return on investment over 90 days.

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

AAEON Technology  vs.  Hwa Fong Rubber

AAEON Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAEON Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hwa Fong Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwa Fong Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. 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 AAEON Technology and Hwa Fong

The main advantage of trading using opposite AAEON Technology and Hwa Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAEON Technology 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 AAEON Technology 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.