Correlation Between Huaneng Power and Adtalem Global

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

By analyzing existing cross correlation between Huaneng Power International and Adtalem Global Education, you can compare the effects of market volatilities on Huaneng Power and Adtalem Global 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 Huaneng Power with a short position of Adtalem Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Power and Adtalem Global.

Diversification Opportunities for Huaneng Power and Adtalem Global

-0.56

Correlation Coefficient

Huaneng Power  Adtalem Global

Excellent diversification

The 3 months correlation between Huaneng and Adtalem is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Power International and Adtalem Global Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adtalem Global Education and Huaneng Power 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 Huaneng Power International are associated (or correlated) with Adtalem Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adtalem Global Education has no effect on the direction of Huaneng Power i.e., Huaneng Power and Adtalem Global go up and down completely randomly.

Pair Corralation between Huaneng Power and Adtalem Global

Assuming the 90 days trading horizon Huaneng Power is expected to generate 1.63 times less return on investment than Adtalem Global. In addition to that, Huaneng Power is 1.73 times more volatile than Adtalem Global Education. It trades about 0.04 of its total potential returns per unit of risk. Adtalem Global Education is currently generating about 0.12 per unit of volatility. If you would invest  3,400  in Adtalem Global Education on October 4, 2024 and sell it today you would earn a total of  5,250  from holding Adtalem Global Education or generate 154.41% return on investment over 90 days.

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

Huaneng Power International  vs.  Adtalem Global Education

Huaneng Power Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaneng Power International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Huaneng Power is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Adtalem Global Education

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Adtalem Global Education are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Adtalem Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaneng Power and Adtalem Global

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

The idea behind Huaneng Power International and Adtalem Global Education 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.