Correlation Between Armada Hflr and Shijiazhuang Tonhe

Can any of the company-specific risk be diversified away by investing in both Armada Hflr and Shijiazhuang Tonhe 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 Shijiazhuang Tonhe 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 Shijiazhuang Tonhe Electronics, you can compare the effects of market volatilities on Armada Hflr and Shijiazhuang Tonhe 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 Shijiazhuang Tonhe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and Shijiazhuang Tonhe.

Diversification Opportunities for Armada Hflr and Shijiazhuang Tonhe

-0.53

Correlation Coefficient

Armada Hflr  Shijiazhuang Tonhe

Excellent diversification

The 3 months correlation between Armada and Shijiazhuang is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Shijiazhuang Tonhe Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shijiazhuang Tonhe 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 Shijiazhuang Tonhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shijiazhuang Tonhe has no effect on the direction of Armada Hflr i.e., Armada Hflr and Shijiazhuang Tonhe go up and down completely randomly.

Pair Corralation between Armada Hflr and Shijiazhuang Tonhe

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the Shijiazhuang Tonhe. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 2.46 times less risky than Shijiazhuang Tonhe. The stock trades about -0.12 of its potential returns per unit of risk. The Shijiazhuang Tonhe Electronics is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,304  in Shijiazhuang Tonhe Electronics on September 20, 2024 and sell it today you would earn a total of  524.00  from holding Shijiazhuang Tonhe Electronics or generate 40.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Armada Hflr Pr  vs.  Shijiazhuang Tonhe Electronics

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Shijiazhuang Tonhe

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shijiazhuang Tonhe Electronics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shijiazhuang Tonhe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Armada Hflr and Shijiazhuang Tonhe

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

The idea behind Armada Hflr Pr and Shijiazhuang Tonhe Electronics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.