Correlation Between Bengang Steel and Huaxi Securities

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

By analyzing existing cross correlation between Bengang Steel Plates and Huaxi Securities Co, you can compare the effects of market volatilities on Bengang Steel and Huaxi Securities 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 Bengang Steel with a short position of Huaxi Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bengang Steel and Huaxi Securities.

Diversification Opportunities for Bengang Steel and Huaxi Securities

0.82

Correlation Coefficient

Bengang Steel  Huaxi Securities

Very poor diversification

The 3 months correlation between Bengang and Huaxi is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bengang Steel Plates and Huaxi Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxi Securities and Bengang Steel 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 Bengang Steel Plates are associated (or correlated) with Huaxi Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxi Securities has no effect on the direction of Bengang Steel i.e., Bengang Steel and Huaxi Securities go up and down completely randomly.

Pair Corralation between Bengang Steel and Huaxi Securities

Assuming the 90 days trading horizon Bengang Steel Plates is expected to under-perform the Huaxi Securities. But the stock apears to be less risky and, when comparing its historical volatility, Bengang Steel Plates is 1.03 times less risky than Huaxi Securities. The stock trades about -0.03 of its potential returns per unit of risk. The Huaxi Securities Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  879.00  in Huaxi Securities Co on September 29, 2024 and sell it today you would lose (10.00) from holding Huaxi Securities Co or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Bengang Steel Plates  vs.  Huaxi Securities Co

Bengang Steel Plates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bengang Steel Plates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bengang Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Huaxi Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaxi Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Huaxi Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bengang Steel and Huaxi Securities

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

The idea behind Bengang Steel Plates and Huaxi Securities Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.