Correlation Between Ama Marine and Hwa Fong

Can any of the company-specific risk be diversified away by investing in both Ama Marine and Hwa Fong 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 Ama Marine and Hwa Fong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ama Marine Public and Hwa Fong Rubber, you can compare the effects of market volatilities on Ama Marine and Hwa Fong 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 Ama Marine with a short position of Hwa Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ama Marine and Hwa Fong.

Diversification Opportunities for Ama Marine and Hwa Fong

0.84

Correlation Coefficient

Ama Marine  Hwa Fong

Very poor diversification

The 3 months correlation between Ama and Hwa is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ama Marine Public and Hwa Fong Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwa Fong Rubber and Ama Marine 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 Ama Marine Public are associated (or correlated) with Hwa Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwa Fong Rubber has no effect on the direction of Ama Marine i.e., Ama Marine and Hwa Fong go up and down completely randomly.

Pair Corralation between Ama Marine and Hwa Fong

Assuming the 90 days trading horizon Ama Marine Public is expected to generate 1.02 times more return on investment than Hwa Fong. However, Ama Marine is 1.02 times more volatile than Hwa Fong Rubber. It trades about -0.13 of its potential returns per unit of risk. Hwa Fong Rubber is currently generating about -0.19 per unit of risk. If you would invest  458.00  in Ama Marine Public on September 18, 2024 and sell it today you would lose (36.00) from holding Ama Marine Public or give up 7.86% of portfolio value over 90 days.

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

Ama Marine Public  vs.  Hwa Fong Rubber

Ama Marine Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ama Marine Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Hwa Fong Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwa Fong Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ama Marine and Hwa Fong

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

The idea behind Ama Marine Public and Hwa Fong Rubber 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.