Correlation Between TWFG, and Huize Holding

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

By analyzing existing cross correlation between TWFG, Class A and Huize Holding, you can compare the effects of market volatilities on TWFG, and Huize Holding 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 TWFG, with a short position of Huize Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of TWFG, and Huize Holding.

Diversification Opportunities for TWFG, and Huize Holding

-0.6

Correlation Coefficient

TWFG,  Huize Holding

Excellent diversification

The 3 months correlation between TWFG, and Huize is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding TWFG, Class A and Huize Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huize Holding and TWFG, 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 TWFG, Class A are associated (or correlated) with Huize Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huize Holding has no effect on the direction of TWFG, i.e., TWFG, and Huize Holding go up and down completely randomly.

Pair Corralation between TWFG, and Huize Holding

Given the investment horizon of 90 days TWFG, is expected to generate 6.24 times less return on investment than Huize Holding. But when comparing it to its historical volatility, TWFG, Class A is 16.42 times less risky than Huize Holding. It trades about 0.11 of its potential returns per unit of risk. Huize Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Huize Holding on October 21, 2024 and sell it today you would earn a total of  165.00  from holding Huize Holding or generate 128.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	25.81%
Values	Daily Returns

TWFG, Class A  vs.  Huize Holding

TWFG, Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TWFG, Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, TWFG, is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Huize Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huize Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Huize Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TWFG, and Huize Holding

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

The idea behind TWFG, Class A and Huize Holding 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.