Correlation Between Information Technology and HUA YU

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

By analyzing existing cross correlation between Information Technology Total and HUA YU LIEN, you can compare the effects of market volatilities on Information Technology and HUA YU 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 Information Technology with a short position of HUA YU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and HUA YU.

Diversification Opportunities for Information Technology and HUA YU

-0.45

Correlation Coefficient

Information Technology  HUA YU

Very good diversification

The 3 months correlation between Information and HUA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and HUA YU LIEN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUA YU LIEN and Information 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 Information Technology Total are associated (or correlated) with HUA YU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUA YU LIEN has no effect on the direction of Information Technology i.e., Information Technology and HUA YU go up and down completely randomly.

Pair Corralation between Information Technology and HUA YU

Assuming the 90 days trading horizon Information Technology Total is expected to generate 0.71 times more return on investment than HUA YU. However, Information Technology Total is 1.41 times less risky than HUA YU. It trades about 0.0 of its potential returns per unit of risk. HUA YU LIEN is currently generating about -0.12 per unit of risk. If you would invest  4,520  in Information Technology Total on September 2, 2024 and sell it today you would lose (60.00) from holding Information Technology Total or give up 1.33% of portfolio value over 90 days.

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

Information Technology Total  vs.  HUA YU LIEN

Information Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

HUA YU LIEN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUA YU LIEN 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.

Pair Trading with Information Technology and HUA YU

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

The idea behind Information Technology Total and HUA YU LIEN 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.