Correlation Between Sirtec International and Hocheng Corp

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

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

Diversification Opportunities for Sirtec International and Hocheng Corp

0.77

Correlation Coefficient

Sirtec International  Hocheng Corp

Poor diversification

The 3 months correlation between Sirtec and Hocheng is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sirtec International Co and Hocheng Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hocheng Corp and Sirtec International 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 Sirtec International Co are associated (or correlated) with Hocheng Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hocheng Corp has no effect on the direction of Sirtec International i.e., Sirtec International and Hocheng Corp go up and down completely randomly.

Pair Corralation between Sirtec International and Hocheng Corp

Assuming the 90 days trading horizon Sirtec International Co is expected to under-perform the Hocheng Corp. But the stock apears to be less risky and, when comparing its historical volatility, Sirtec International Co is 1.12 times less risky than Hocheng Corp. The stock trades about -0.04 of its potential returns per unit of risk. The Hocheng Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,775  in Hocheng Corp on September 5, 2024 and sell it today you would lose (45.00) from holding Hocheng Corp or give up 2.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Sirtec International Co  vs.  Hocheng Corp

Sirtec International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hocheng Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hocheng Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hocheng Corp 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 Sirtec International and Hocheng Corp

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

The idea behind Sirtec International Co and Hocheng Corp 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.