Correlation Between Huaxia Fund and Qingdao Choho

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

By analyzing existing cross correlation between Huaxia Fund Management and Qingdao Choho Industrial, you can compare the effects of market volatilities on Huaxia Fund and Qingdao Choho 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 Huaxia Fund with a short position of Qingdao Choho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaxia Fund and Qingdao Choho.

Diversification Opportunities for Huaxia Fund and Qingdao Choho

0.22

Correlation Coefficient

Huaxia Fund  Qingdao Choho

Modest diversification

The 3 months correlation between Huaxia and Qingdao is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Huaxia Fund Management and Qingdao Choho Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Choho Industrial and Huaxia Fund 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 Huaxia Fund Management are associated (or correlated) with Qingdao Choho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Choho Industrial has no effect on the direction of Huaxia Fund i.e., Huaxia Fund and Qingdao Choho go up and down completely randomly.

Pair Corralation between Huaxia Fund and Qingdao Choho

Assuming the 90 days trading horizon Huaxia Fund is expected to generate 2.01 times less return on investment than Qingdao Choho. But when comparing it to its historical volatility, Huaxia Fund Management is 2.58 times less risky than Qingdao Choho. It trades about 0.09 of its potential returns per unit of risk. Qingdao Choho Industrial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,425  in Qingdao Choho Industrial on September 27, 2024 and sell it today you would earn a total of  248.00  from holding Qingdao Choho Industrial or generate 10.23% return on investment over 90 days.

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

Huaxia Fund Management  vs.  Qingdao Choho Industrial

Huaxia Fund Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Qingdao Choho Industrial

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Choho Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Choho sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaxia Fund and Qingdao Choho

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

The idea behind Huaxia Fund Management and Qingdao Choho Industrial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.