Correlation Between Eco World and Hengyuan Refining

Can any of the company-specific risk be diversified away by investing in both Eco World and Hengyuan Refining 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 Eco World and Hengyuan Refining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eco World Develop and Hengyuan Refining, you can compare the effects of market volatilities on Eco World and Hengyuan Refining 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 Eco World with a short position of Hengyuan Refining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eco World and Hengyuan Refining.

Diversification Opportunities for Eco World and Hengyuan Refining

0.3

Correlation Coefficient

Eco World  Hengyuan Refining

Weak diversification

The 3 months correlation between Eco and Hengyuan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Eco World Develop and Hengyuan Refining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengyuan Refining and Eco World 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 Eco World Develop are associated (or correlated) with Hengyuan Refining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengyuan Refining has no effect on the direction of Eco World i.e., Eco World and Hengyuan Refining go up and down completely randomly.

Pair Corralation between Eco World and Hengyuan Refining

Assuming the 90 days trading horizon Eco World Develop is expected to generate 0.53 times more return on investment than Hengyuan Refining. However, Eco World Develop is 1.88 times less risky than Hengyuan Refining. It trades about 0.14 of its potential returns per unit of risk. Hengyuan Refining is currently generating about -0.01 per unit of risk. If you would invest  156.00  in Eco World Develop on September 3, 2024 and sell it today you would earn a total of  33.00  from holding Eco World Develop or generate 21.15% return on investment over 90 days.

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

Eco World Develop  vs.  Hengyuan Refining

Eco World Develop

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eco World Develop are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Eco World disclosed solid returns over the last few months and may actually be approaching a breakup point.

Hengyuan Refining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hengyuan Refining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Hengyuan Refining is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Eco World and Hengyuan Refining

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

The idea behind Eco World Develop and Hengyuan Refining 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.