Correlation Between Hwa Fong and City Sports

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

By analyzing existing cross correlation between Hwa Fong Rubber and City Sports and, you can compare the effects of market volatilities on Hwa Fong and City Sports 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 Hwa Fong with a short position of City Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwa Fong and City Sports.

Diversification Opportunities for Hwa Fong and City Sports

0.8

Correlation Coefficient

Hwa Fong  City Sports

Very poor diversification

The 3 months correlation between Hwa and City is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and City Sports and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Sports and Hwa Fong 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 Hwa Fong Rubber are associated (or correlated) with City Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Sports has no effect on the direction of Hwa Fong i.e., Hwa Fong and City Sports go up and down completely randomly.

Pair Corralation between Hwa Fong and City Sports

Assuming the 90 days trading horizon Hwa Fong Rubber is expected to under-perform the City Sports. In addition to that, Hwa Fong is 1.05 times more volatile than City Sports and. It trades about -0.2 of its total potential returns per unit of risk. City Sports and is currently generating about -0.12 per unit of volatility. If you would invest  8,975  in City Sports and on December 27, 2024 and sell it today you would lose (575.00) from holding City Sports and or give up 6.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Hwa Fong Rubber  vs.  City Sports and

Hwa Fong Rubber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hwa Fong Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

City Sports

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Sports and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Hwa Fong and City Sports

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

The idea behind Hwa Fong Rubber and City Sports and 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.