Correlation Between Hubei Huaqiang and KSEC Intelligent

Can any of the company-specific risk be diversified away by investing in both Hubei Huaqiang and KSEC Intelligent 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 Hubei Huaqiang and KSEC Intelligent into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hubei Huaqiang High Tech and KSEC Intelligent Technology, you can compare the effects of market volatilities on Hubei Huaqiang and KSEC Intelligent 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 Hubei Huaqiang with a short position of KSEC Intelligent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Huaqiang and KSEC Intelligent.

Diversification Opportunities for Hubei Huaqiang and KSEC Intelligent

0.72

Correlation Coefficient

Hubei Huaqiang  KSEC Intelligent

Poor diversification

The 3 months correlation between Hubei and KSEC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Huaqiang High Tech and KSEC Intelligent Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSEC Intelligent Tec and Hubei Huaqiang 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 Hubei Huaqiang High Tech are associated (or correlated) with KSEC Intelligent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSEC Intelligent Tec has no effect on the direction of Hubei Huaqiang i.e., Hubei Huaqiang and KSEC Intelligent go up and down completely randomly.

Pair Corralation between Hubei Huaqiang and KSEC Intelligent

Assuming the 90 days trading horizon Hubei Huaqiang High Tech is expected to generate 0.75 times more return on investment than KSEC Intelligent. However, Hubei Huaqiang High Tech is 1.34 times less risky than KSEC Intelligent. It trades about -0.15 of its potential returns per unit of risk. KSEC Intelligent Technology is currently generating about -0.23 per unit of risk. If you would invest  1,675  in Hubei Huaqiang High Tech on October 6, 2024 and sell it today you would lose (197.00) from holding Hubei Huaqiang High Tech or give up 11.76% of portfolio value over 90 days.

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

Hubei Huaqiang High Tech  vs.  KSEC Intelligent Technology

Hubei Huaqiang High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Huaqiang High Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KSEC Intelligent Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KSEC Intelligent Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hubei Huaqiang and KSEC Intelligent

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

The idea behind Hubei Huaqiang High Tech and KSEC Intelligent 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.