Correlation Between China Gas and Hooker Furniture

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

By analyzing existing cross correlation between China Gas Holdings and Hooker Furniture, you can compare the effects of market volatilities on China Gas and Hooker Furniture 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 China Gas with a short position of Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Gas and Hooker Furniture.

Diversification Opportunities for China Gas and Hooker Furniture

-0.13

Correlation Coefficient

China Gas  Hooker Furniture

Good diversification

The 3 months correlation between China and Hooker is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding China Gas Holdings and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture and China Gas 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 China Gas Holdings are associated (or correlated) with Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of China Gas i.e., China Gas and Hooker Furniture go up and down completely randomly.

Pair Corralation between China Gas and Hooker Furniture

Assuming the 90 days horizon China Gas Holdings is expected to generate 0.24 times more return on investment than Hooker Furniture. However, China Gas Holdings is 4.15 times less risky than Hooker Furniture. It trades about -0.22 of its potential returns per unit of risk. Hooker Furniture is currently generating about -0.34 per unit of risk. If you would invest  85.00  in China Gas Holdings on October 10, 2024 and sell it today you would lose (3.00) from holding China Gas Holdings or give up 3.53% of portfolio value over 90 days.

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

China Gas Holdings  vs.  Hooker Furniture

China Gas Holdings

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days China Gas Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hooker Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with China Gas and Hooker Furniture

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

The idea behind China Gas Holdings and Hooker Furniture 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 Global Correlations module to find global opportunities by holding instruments from different markets.