Correlation Between Puyang Huicheng and Weihai Honglin

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

By analyzing existing cross correlation between Puyang Huicheng Electronic and Weihai Honglin Electronic, you can compare the effects of market volatilities on Puyang Huicheng and Weihai Honglin 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 Puyang Huicheng with a short position of Weihai Honglin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Puyang Huicheng and Weihai Honglin.

Diversification Opportunities for Puyang Huicheng and Weihai Honglin

0.95

Correlation Coefficient

Puyang Huicheng  Weihai Honglin

Almost no diversification

The 3 months correlation between Puyang and Weihai is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Puyang Huicheng Electronic and Weihai Honglin Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weihai Honglin Electronic and Puyang Huicheng 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 Puyang Huicheng Electronic are associated (or correlated) with Weihai Honglin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weihai Honglin Electronic has no effect on the direction of Puyang Huicheng i.e., Puyang Huicheng and Weihai Honglin go up and down completely randomly.

Pair Corralation between Puyang Huicheng and Weihai Honglin

Assuming the 90 days trading horizon Puyang Huicheng Electronic is expected to generate 1.07 times more return on investment than Weihai Honglin. However, Puyang Huicheng is 1.07 times more volatile than Weihai Honglin Electronic. It trades about 0.13 of its potential returns per unit of risk. Weihai Honglin Electronic is currently generating about 0.13 per unit of risk. If you would invest  1,314  in Puyang Huicheng Electronic on September 5, 2024 and sell it today you would earn a total of  367.00  from holding Puyang Huicheng Electronic or generate 27.93% return on investment over 90 days.

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

Puyang Huicheng Electronic  vs.  Weihai Honglin Electronic

Puyang Huicheng Elec

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Puyang Huicheng Electronic are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Puyang Huicheng sustained solid returns over the last few months and may actually be approaching a breakup point.

Weihai Honglin Electronic

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weihai Honglin Electronic are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Weihai Honglin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Puyang Huicheng and Weihai Honglin

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

The idea behind Puyang Huicheng Electronic and Weihai Honglin Electronic 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.