Correlation Between INTERSHOP Communications and Huaneng Power

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

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

Diversification Opportunities for INTERSHOP Communications and Huaneng Power

-0.68

Correlation Coefficient

INTERSHOP Communications  Huaneng Power

Excellent diversification

The 3 months correlation between INTERSHOP and Huaneng is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie and Huaneng Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Power Intern and INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft are associated (or correlated) with Huaneng Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Power Intern has no effect on the direction of INTERSHOP Communications i.e., INTERSHOP Communications and Huaneng Power go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and Huaneng Power

Assuming the 90 days trading horizon INTERSHOP Communications is expected to generate 4.78 times less return on investment than Huaneng Power. But when comparing it to its historical volatility, INTERSHOP Communications Aktiengesellschaft is 1.61 times less risky than Huaneng Power. It trades about 0.02 of its potential returns per unit of risk. Huaneng Power International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Huaneng Power International on October 6, 2024 and sell it today you would earn a total of  23.00  from holding Huaneng Power International or generate 85.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.68%
Values	Daily Returns

INTERSHOP Communications Aktie  vs.  Huaneng Power International

INTERSHOP Communications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with INTERSHOP Communications and Huaneng Power

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

The idea behind INTERSHOP Communications Aktiengesellschaft and Huaneng Power International 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.