Correlation Between Hengyuan Refining and Daya Materials

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

By analyzing existing cross correlation between Hengyuan Refining and Daya Materials Bhd, you can compare the effects of market volatilities on Hengyuan Refining and Daya Materials 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 Hengyuan Refining with a short position of Daya Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengyuan Refining and Daya Materials.

Diversification Opportunities for Hengyuan Refining and Daya Materials

0.33

Correlation Coefficient

Hengyuan Refining  Daya Materials

Weak diversification

The 3 months correlation between Hengyuan and Daya is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hengyuan Refining and Daya Materials Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daya Materials Bhd and Hengyuan Refining 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 Hengyuan Refining are associated (or correlated) with Daya Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daya Materials Bhd has no effect on the direction of Hengyuan Refining i.e., Hengyuan Refining and Daya Materials go up and down completely randomly.

Pair Corralation between Hengyuan Refining and Daya Materials

Assuming the 90 days trading horizon Hengyuan Refining is expected to generate 1.03 times more return on investment than Daya Materials. However, Hengyuan Refining is 1.03 times more volatile than Daya Materials Bhd. It trades about 0.05 of its potential returns per unit of risk. Daya Materials Bhd is currently generating about -0.04 per unit of risk. If you would invest  200.00  in Hengyuan Refining on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Hengyuan Refining or generate 8.5% return on investment over 90 days.

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

Hengyuan Refining  vs.  Daya Materials Bhd

Hengyuan Refining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengyuan Refining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Hengyuan Refining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Daya Materials Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daya Materials Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Hengyuan Refining and Daya Materials

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

The idea behind Hengyuan Refining and Daya Materials Bhd 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.