Correlation Between Ruentex Development and Hsin Kuang

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

By analyzing existing cross correlation between Ruentex Development Co and Hsin Kuang Steel, you can compare the effects of market volatilities on Ruentex Development and Hsin Kuang 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 Ruentex Development with a short position of Hsin Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and Hsin Kuang.

Diversification Opportunities for Ruentex Development and Hsin Kuang

0.45

Correlation Coefficient

Ruentex Development  Hsin Kuang

Very weak diversification

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

Pair Corralation between Ruentex Development and Hsin Kuang

Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the Hsin Kuang. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 1.71 times less risky than Hsin Kuang. The stock trades about -0.11 of its potential returns per unit of risk. The Hsin Kuang Steel is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,970  in Hsin Kuang Steel on December 3, 2024 and sell it today you would earn a total of  230.00  from holding Hsin Kuang Steel or generate 4.63% return on investment over 90 days.

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

Ruentex Development Co  vs.  Hsin Kuang Steel

Ruentex Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Hsin Kuang Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hsin Kuang Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hsin Kuang 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 Ruentex Development and Hsin Kuang

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

The idea behind Ruentex Development Co and Hsin Kuang Steel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.