Correlation Between Armada Hflr and China Electric

Can any of the company-specific risk be diversified away by investing in both Armada Hflr and China Electric 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 Armada Hflr and China Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hflr Pr and China Electric Manufacturing, you can compare the effects of market volatilities on Armada Hflr and China Electric 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 Armada Hflr with a short position of China Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and China Electric.

Diversification Opportunities for Armada Hflr and China Electric

0.54

Correlation Coefficient

Armada Hflr  China Electric

Very weak diversification

The 3 months correlation between Armada and China is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and China Electric Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Electric Manuf and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with China Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Electric Manuf has no effect on the direction of Armada Hflr i.e., Armada Hflr and China Electric go up and down completely randomly.

Pair Corralation between Armada Hflr and China Electric

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the China Electric. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 1.09 times less risky than China Electric. The stock trades about -0.37 of its potential returns per unit of risk. The China Electric Manufacturing is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  1,480  in China Electric Manufacturing on December 5, 2024 and sell it today you would earn a total of  130.00  from holding China Electric Manufacturing or generate 8.78% return on investment over 90 days.

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

Armada Hflr Pr  vs.  China Electric Manufacturing

Armada Hflr Pr

Risk-Adjusted Performance

Very Weak

Over the last 90 days Armada Hflr Pr 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 technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

China Electric Manuf

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Electric Manufacturing 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.

Pair Trading with Armada Hflr and China Electric

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

The idea behind Armada Hflr Pr and China Electric Manufacturing 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.