Correlation Between Hisense Home and ASPEN TECHINC

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

By analyzing existing cross correlation between Hisense Home Appliances and ASPEN TECHINC DL, you can compare the effects of market volatilities on Hisense Home and ASPEN TECHINC 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 Hisense Home with a short position of ASPEN TECHINC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hisense Home and ASPEN TECHINC.

Diversification Opportunities for Hisense Home and ASPEN TECHINC

0.2

Correlation Coefficient

Hisense Home  ASPEN TECHINC

Modest diversification

The 3 months correlation between Hisense and ASPEN is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hisense Home Appliances and ASPEN TECHINC DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN TECHINC DL and Hisense Home 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 Hisense Home Appliances are associated (or correlated) with ASPEN TECHINC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN TECHINC DL has no effect on the direction of Hisense Home i.e., Hisense Home and ASPEN TECHINC go up and down completely randomly.

Pair Corralation between Hisense Home and ASPEN TECHINC

Assuming the 90 days horizon Hisense Home Appliances is expected to generate 2.24 times more return on investment than ASPEN TECHINC. However, Hisense Home is 2.24 times more volatile than ASPEN TECHINC DL. It trades about 0.09 of its potential returns per unit of risk. ASPEN TECHINC DL is currently generating about 0.07 per unit of risk. If you would invest  99.00  in Hisense Home Appliances on October 24, 2024 and sell it today you would earn a total of  233.00  from holding Hisense Home Appliances or generate 235.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.76%
Values	Daily Returns

Hisense Home Appliances  vs.  ASPEN TECHINC DL

Hisense Home Appliances

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisense Home Appliances are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hisense Home reported solid returns over the last few months and may actually be approaching a breakup point.

ASPEN TECHINC DL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hisense Home and ASPEN TECHINC

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

The idea behind Hisense Home Appliances and ASPEN TECHINC DL 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.