Correlation Between Alar Pharmaceuticals and Hua Eng

Can any of the company-specific risk be diversified away by investing in both Alar Pharmaceuticals and Hua Eng 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 Alar Pharmaceuticals and Hua Eng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alar Pharmaceuticals and Hua Eng Wire, you can compare the effects of market volatilities on Alar Pharmaceuticals and Hua Eng 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 Alar Pharmaceuticals with a short position of Hua Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alar Pharmaceuticals and Hua Eng.

Diversification Opportunities for Alar Pharmaceuticals and Hua Eng

0.7

Correlation Coefficient

Alar Pharmaceuticals  Hua Eng

Poor diversification

The 3 months correlation between Alar and Hua is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alar Pharmaceuticals and Hua Eng Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Eng Wire and Alar Pharmaceuticals 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 Alar Pharmaceuticals are associated (or correlated) with Hua Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Eng Wire has no effect on the direction of Alar Pharmaceuticals i.e., Alar Pharmaceuticals and Hua Eng go up and down completely randomly.

Pair Corralation between Alar Pharmaceuticals and Hua Eng

Assuming the 90 days trading horizon Alar Pharmaceuticals is expected to generate 2.07 times less return on investment than Hua Eng. In addition to that, Alar Pharmaceuticals is 1.27 times more volatile than Hua Eng Wire. It trades about 0.04 of its total potential returns per unit of risk. Hua Eng Wire is currently generating about 0.1 per unit of volatility. If you would invest  2,605  in Hua Eng Wire on December 28, 2024 and sell it today you would earn a total of  345.00  from holding Hua Eng Wire or generate 13.24% return on investment over 90 days.

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

Alar Pharmaceuticals  vs.  Hua Eng Wire

Alar Pharmaceuticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alar Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Alar Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hua Eng Wire

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Eng Wire are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hua Eng showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alar Pharmaceuticals and Hua Eng

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

The idea behind Alar Pharmaceuticals and Hua Eng Wire 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.