Correlation Between CHINA HUARONG and Moderna

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

By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and Moderna, you can compare the effects of market volatilities on CHINA HUARONG and Moderna 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 CHINA HUARONG with a short position of Moderna. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Moderna.

Diversification Opportunities for CHINA HUARONG and Moderna

0.44

Correlation Coefficient

CHINA HUARONG  Moderna

Very weak diversification

The 3 months correlation between CHINA and Moderna is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 are associated (or correlated) with Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Moderna go up and down completely randomly.

Pair Corralation between CHINA HUARONG and Moderna

Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 10.92 times more return on investment than Moderna. However, CHINA HUARONG is 10.92 times more volatile than Moderna. It trades about 0.11 of its potential returns per unit of risk. Moderna is currently generating about -0.06 per unit of risk. If you would invest  0.60  in CHINA HUARONG ENERHD 50 on October 7, 2024 and sell it today you would lose (0.45) from holding CHINA HUARONG ENERHD 50 or give up 75.0% of portfolio value over 90 days.

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

CHINA HUARONG ENERHD 50  vs.  Moderna

CHINA HUARONG ENERHD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA HUARONG ENERHD 50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Moderna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CHINA HUARONG and Moderna

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

The idea behind CHINA HUARONG ENERHD 50 and Moderna 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.