Correlation Between Hubei Geoway and Montage Technology

Can any of the company-specific risk be diversified away by investing in both Hubei Geoway and Montage Technology 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 Montage Technology 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 Montage Technology Co, you can compare the effects of market volatilities on Hubei Geoway and Montage Technology 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 Montage Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Geoway and Montage Technology.

Diversification Opportunities for Hubei Geoway and Montage Technology

0.18

Correlation Coefficient

Hubei Geoway  Montage Technology

Average diversification

The 3 months correlation between Hubei and Montage is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Montage Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montage Technology 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 Montage Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montage Technology has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Montage Technology go up and down completely randomly.

Pair Corralation between Hubei Geoway and Montage Technology

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to under-perform the Montage Technology. In addition to that, Hubei Geoway is 1.28 times more volatile than Montage Technology Co. It trades about -0.07 of its total potential returns per unit of risk. Montage Technology Co is currently generating about 0.18 per unit of volatility. If you would invest  6,738  in Montage Technology Co on September 30, 2024 and sell it today you would earn a total of  810.00  from holding Montage Technology Co or generate 12.02% return on investment over 90 days.

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

Hubei Geoway Investment  vs.  Montage Technology Co

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.

Montage Technology

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Hubei Geoway and Montage Technology

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

The idea behind Hubei Geoway Investment and Montage Technology Co 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.