Correlation Between United States and Hongli Group

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

By analyzing existing cross correlation between United States Steel and Hongli Group Ordinary, you can compare the effects of market volatilities on United States and Hongli Group 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 United States with a short position of Hongli Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Hongli Group.

Diversification Opportunities for United States and Hongli Group

-0.29

Correlation Coefficient

United States  Hongli Group

Very good diversification

The 3 months correlation between United and Hongli is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary and United States 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 United States Steel are associated (or correlated) with Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of United States i.e., United States and Hongli Group go up and down completely randomly.

Pair Corralation between United States and Hongli Group

Taking into account the 90-day investment horizon United States Steel is expected to generate 0.81 times more return on investment than Hongli Group. However, United States Steel is 1.24 times less risky than Hongli Group. It trades about 0.12 of its potential returns per unit of risk. Hongli Group Ordinary is currently generating about 0.02 per unit of risk. If you would invest  3,190  in United States Steel on December 17, 2024 and sell it today you would earn a total of  710.00  from holding United States Steel or generate 22.26% return on investment over 90 days.

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

United States Steel  vs.  Hongli Group Ordinary

United States Steel

Risk-Adjusted Performance

OK

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

Hongli Group Ordinary

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hongli Group Ordinary are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Hongli Group is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with United States and Hongli Group

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

The idea behind United States Steel and Hongli Group Ordinary 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.