Correlation Between Ho Tung and United Orthopedic

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

By analyzing existing cross correlation between Ho Tung Chemical and United Orthopedic, you can compare the effects of market volatilities on Ho Tung and United Orthopedic 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 Ho Tung with a short position of United Orthopedic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ho Tung and United Orthopedic.

Diversification Opportunities for Ho Tung and United Orthopedic

-0.49

Correlation Coefficient

Ho Tung  United Orthopedic

Very good diversification

The 3 months correlation between 1714 and United is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ho Tung Chemical and United Orthopedic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Orthopedic and Ho Tung 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 Ho Tung Chemical are associated (or correlated) with United Orthopedic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Orthopedic has no effect on the direction of Ho Tung i.e., Ho Tung and United Orthopedic go up and down completely randomly.

Pair Corralation between Ho Tung and United Orthopedic

Assuming the 90 days trading horizon Ho Tung Chemical is expected to under-perform the United Orthopedic. But the stock apears to be less risky and, when comparing its historical volatility, Ho Tung Chemical is 1.36 times less risky than United Orthopedic. The stock trades about -0.05 of its potential returns per unit of risk. The United Orthopedic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,400  in United Orthopedic on September 12, 2024 and sell it today you would earn a total of  150.00  from holding United Orthopedic or generate 1.6% return on investment over 90 days.

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

Ho Tung Chemical  vs.  United Orthopedic

Ho Tung Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ho Tung Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ho Tung is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

United Orthopedic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Orthopedic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, United Orthopedic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ho Tung and United Orthopedic

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

The idea behind Ho Tung Chemical and United Orthopedic 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.