Correlation Between Information and Hwa Fong

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

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

Diversification Opportunities for Information and Hwa Fong

-0.07

Correlation Coefficient

Information  Hwa Fong

Good diversification

The 3 months correlation between Information and Hwa is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Information and Communication and Hwa Fong Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwa Fong Rubber and Information 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 Information and Communication are associated (or correlated) with Hwa Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwa Fong Rubber has no effect on the direction of Information i.e., Information and Hwa Fong go up and down completely randomly.

Pair Corralation between Information and Hwa Fong

Assuming the 90 days trading horizon Information and Communication is expected to generate 1.73 times more return on investment than Hwa Fong. However, Information is 1.73 times more volatile than Hwa Fong Rubber. It trades about -0.04 of its potential returns per unit of risk. Hwa Fong Rubber is currently generating about -0.07 per unit of risk. If you would invest  216.00  in Information and Communication on December 5, 2024 and sell it today you would lose (21.00) from holding Information and Communication or give up 9.72% of portfolio value over 90 days.

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

Information and Communication  vs.  Hwa Fong Rubber

Information and Comm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Information and Communication 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.

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 quite persistent basic indicators, Hwa Fong is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Information and Hwa Fong

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

The idea behind Information and Communication and Hwa Fong Rubber 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.