Correlation Between Hubei Geoway and Hefei Metalforming

Can any of the company-specific risk be diversified away by investing in both Hubei Geoway and Hefei Metalforming 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 Hubei Geoway and Hefei Metalforming into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hubei Geoway Investment and Hefei Metalforming Mach, you can compare the effects of market volatilities on Hubei Geoway and Hefei Metalforming 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 Hubei Geoway with a short position of Hefei Metalforming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Geoway and Hefei Metalforming.

Diversification Opportunities for Hubei Geoway and Hefei Metalforming

0.46

Correlation Coefficient

Hubei Geoway  Hefei Metalforming

Very weak diversification

The 3 months correlation between Hubei and Hefei is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Hefei Metalforming Mach in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hefei Metalforming Mach and Hubei Geoway 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 Hubei Geoway Investment are associated (or correlated) with Hefei Metalforming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hefei Metalforming Mach has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Hefei Metalforming go up and down completely randomly.

Pair Corralation between Hubei Geoway and Hefei Metalforming

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to under-perform the Hefei Metalforming. But the stock apears to be less risky and, when comparing its historical volatility, Hubei Geoway Investment is 1.06 times less risky than Hefei Metalforming. The stock trades about -0.01 of its potential returns per unit of risk. The Hefei Metalforming Mach is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  666.00  in Hefei Metalforming Mach on September 30, 2024 and sell it today you would earn a total of  47.00  from holding Hefei Metalforming Mach or generate 7.06% return on investment over 90 days.

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

Hubei Geoway Investment  vs.  Hefei Metalforming Mach

Hubei Geoway Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Geoway Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hubei Geoway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hefei Metalforming Mach

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hefei Metalforming Mach are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hefei Metalforming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hubei Geoway and Hefei Metalforming

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

The idea behind Hubei Geoway Investment and Hefei Metalforming Mach 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.