Correlation Between Hwashin Precision and CBI

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

By analyzing existing cross correlation between Hwashin Precision Engineering and CBI Co, you can compare the effects of market volatilities on Hwashin Precision and CBI 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 Hwashin Precision with a short position of CBI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwashin Precision and CBI.

Diversification Opportunities for Hwashin Precision and CBI

0.89

Correlation Coefficient

Hwashin Precision  CBI

Very poor diversification

The 3 months correlation between Hwashin and CBI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hwashin Precision Engineering and CBI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBI Co and Hwashin Precision 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 Hwashin Precision Engineering are associated (or correlated) with CBI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBI Co has no effect on the direction of Hwashin Precision i.e., Hwashin Precision and CBI go up and down completely randomly.

Pair Corralation between Hwashin Precision and CBI

Assuming the 90 days trading horizon Hwashin Precision Engineering is expected to generate 0.75 times more return on investment than CBI. However, Hwashin Precision Engineering is 1.33 times less risky than CBI. It trades about -0.17 of its potential returns per unit of risk. CBI Co is currently generating about -0.31 per unit of risk. If you would invest  135,900  in Hwashin Precision Engineering on September 1, 2024 and sell it today you would lose (17,200) from holding Hwashin Precision Engineering or give up 12.66% of portfolio value over 90 days.

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

Hwashin Precision Engineering  vs.  CBI Co

Hwashin Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwashin Precision Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

CBI Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBI Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hwashin Precision and CBI

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

The idea behind Hwashin Precision Engineering and CBI 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.