Correlation Between AVVAA World and Hong Yuan

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

By analyzing existing cross correlation between AVVAA World Health and Hong Yuan Holding, you can compare the effects of market volatilities on AVVAA World and Hong Yuan 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 AVVAA World with a short position of Hong Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVVAA World and Hong Yuan.

Diversification Opportunities for AVVAA World and Hong Yuan

-0.17

Correlation Coefficient

AVVAA World  Hong Yuan

Good diversification

The 3 months correlation between AVVAA and Hong is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding AVVAA World Health and Hong Yuan Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Yuan Holding and AVVAA World 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 AVVAA World Health are associated (or correlated) with Hong Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Yuan Holding has no effect on the direction of AVVAA World i.e., AVVAA World and Hong Yuan go up and down completely randomly.

Pair Corralation between AVVAA World and Hong Yuan

Given the investment horizon of 90 days AVVAA World is expected to generate 1.17 times less return on investment than Hong Yuan. But when comparing it to its historical volatility, AVVAA World Health is 2.7 times less risky than Hong Yuan. It trades about 0.25 of its potential returns per unit of risk. Hong Yuan Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4.85  in Hong Yuan Holding on December 4, 2024 and sell it today you would lose (0.85) from holding Hong Yuan Holding or give up 17.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

AVVAA World Health  vs.  Hong Yuan Holding

AVVAA World Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVVAA World Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, AVVAA World demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Hong Yuan Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Yuan Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Hong Yuan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVVAA World and Hong Yuan

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

The idea behind AVVAA World Health and Hong Yuan Holding 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.