Correlation Between HIM International and Kuang Hong

Can any of the company-specific risk be diversified away by investing in both HIM International and Kuang Hong 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 HIM International and Kuang Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HIM International Music and Kuang Hong Arts, you can compare the effects of market volatilities on HIM International and Kuang Hong 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 HIM International with a short position of Kuang Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of HIM International and Kuang Hong.

Diversification Opportunities for HIM International and Kuang Hong

0.22

Correlation Coefficient

HIM International  Kuang Hong

Modest diversification

The 3 months correlation between HIM and Kuang is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding HIM International Music and Kuang Hong Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuang Hong Arts and HIM International 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 HIM International Music are associated (or correlated) with Kuang Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuang Hong Arts has no effect on the direction of HIM International i.e., HIM International and Kuang Hong go up and down completely randomly.

Pair Corralation between HIM International and Kuang Hong

Assuming the 90 days trading horizon HIM International Music is expected to generate 1.08 times more return on investment than Kuang Hong. However, HIM International is 1.08 times more volatile than Kuang Hong Arts. It trades about 0.08 of its potential returns per unit of risk. Kuang Hong Arts is currently generating about 0.04 per unit of risk. If you would invest  10,550  in HIM International Music on September 15, 2024 and sell it today you would earn a total of  1,650  from holding HIM International Music or generate 15.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

HIM International Music  vs.  Kuang Hong Arts

HIM International Music

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HIM International Music are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, HIM International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kuang Hong Arts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Hong Arts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kuang Hong 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 HIM International and Kuang Hong

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

The idea behind HIM International Music and Kuang Hong Arts 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.