Correlation Between Astar and Hwabao WP

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

By analyzing existing cross correlation between Astar and Hwabao WP CSI, you can compare the effects of market volatilities on Astar and Hwabao WP 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 Astar with a short position of Hwabao WP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and Hwabao WP.

Diversification Opportunities for Astar and Hwabao WP

0.18

Correlation Coefficient

Astar  Hwabao WP

Average diversification

The 3 months correlation between Astar and Hwabao is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Hwabao WP CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwabao WP CSI and Astar 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 Astar are associated (or correlated) with Hwabao WP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwabao WP CSI has no effect on the direction of Astar i.e., Astar and Hwabao WP go up and down completely randomly.

Pair Corralation between Astar and Hwabao WP

Assuming the 90 days trading horizon Astar is expected to generate 3.0 times more return on investment than Hwabao WP. However, Astar is 3.0 times more volatile than Hwabao WP CSI. It trades about -0.08 of its potential returns per unit of risk. Hwabao WP CSI is currently generating about -0.33 per unit of risk. If you would invest  6.98  in Astar on October 10, 2024 and sell it today you would lose (0.86) from holding Astar or give up 12.32% of portfolio value over 90 days.

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

Astar  vs.  Hwabao WP CSI

Astar

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hwabao WP CSI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwabao WP CSI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hwabao WP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Astar and Hwabao WP

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

The idea behind Astar and Hwabao WP CSI 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.