Correlation Between Huadi International and Analog Devices

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

By analyzing existing cross correlation between Huadi International Group and Analog Devices, you can compare the effects of market volatilities on Huadi International and Analog Devices 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 Huadi International with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huadi International and Analog Devices.

Diversification Opportunities for Huadi International and Analog Devices

0.53

Correlation Coefficient

Huadi International  Analog Devices

Very weak diversification

The 3 months correlation between Huadi and Analog is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Huadi International Group and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Huadi International 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 Huadi International Group are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Huadi International i.e., Huadi International and Analog Devices go up and down completely randomly.

Pair Corralation between Huadi International and Analog Devices

Given the investment horizon of 90 days Huadi International Group is expected to under-perform the Analog Devices. In addition to that, Huadi International is 2.79 times more volatile than Analog Devices. It trades about -0.03 of its total potential returns per unit of risk. Analog Devices is currently generating about -0.02 per unit of volatility. If you would invest  22,440  in Analog Devices on September 17, 2024 and sell it today you would lose (779.00) from holding Analog Devices or give up 3.47% of portfolio value over 90 days.

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

Huadi International Group  vs.  Analog Devices

Huadi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huadi International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Huadi International and Analog Devices

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

The idea behind Huadi International Group and Analog Devices 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.