Correlation Between Hiru and China Health

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

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

Diversification Opportunities for Hiru and China Health

-0.13

Correlation Coefficient

Hiru  China Health

Good diversification

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

Pair Corralation between Hiru and China Health

Given the investment horizon of 90 days Hiru is expected to generate 2.94 times less return on investment than China Health. But when comparing it to its historical volatility, Hiru Corporation is 2.78 times less risky than China Health. It trades about 0.06 of its potential returns per unit of risk. China Health Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  17.00  in China Health Industries on September 12, 2024 and sell it today you would earn a total of  11.00  from holding China Health Industries or generate 64.71% return on investment over 90 days.

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

Hiru Corp.  vs.  China Health Industries

Hiru

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Health Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hiru and China Health

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

The idea behind Hiru Corporation and China Health Industries 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.