Correlation Between Bitcoin and Hua Hong

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

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

Diversification Opportunities for Bitcoin and Hua Hong

-0.17

Correlation Coefficient

Bitcoin  Hua Hong

Good diversification

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

Pair Corralation between Bitcoin and Hua Hong

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.03 times less return on investment than Hua Hong. But when comparing it to its historical volatility, Bitcoin is 1.41 times less risky than Hua Hong. It trades about 0.09 of its potential returns per unit of risk. Hua Hong Semiconductor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Hua Hong Semiconductor on October 24, 2024 and sell it today you would earn a total of  117.00  from holding Hua Hong Semiconductor or generate 66.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.28%
Values	Daily Returns

Bitcoin  vs.  Hua Hong Semiconductor

Bitcoin

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hua Hong Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Hong Semiconductor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hua Hong reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin and Hua Hong

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

The idea behind Bitcoin and Hua Hong Semiconductor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.