Correlation Between Hubei Geoway and Everdisplay Optronics

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

Diversification Opportunities for Hubei Geoway and Everdisplay Optronics

0.41

Correlation Coefficient

Hubei Geoway  Everdisplay Optronics

Very weak diversification

The 3 months correlation between Hubei and Everdisplay is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Everdisplay Optronics Shanghai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everdisplay Optronics 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 Everdisplay Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everdisplay Optronics has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Everdisplay Optronics go up and down completely randomly.

Pair Corralation between Hubei Geoway and Everdisplay Optronics

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to generate 1.1 times more return on investment than Everdisplay Optronics. However, Hubei Geoway is 1.1 times more volatile than Everdisplay Optronics Shanghai. It trades about 0.1 of its potential returns per unit of risk. Everdisplay Optronics Shanghai is currently generating about 0.09 per unit of risk. If you would invest  142.00  in Hubei Geoway Investment on September 25, 2024 and sell it today you would earn a total of  24.00  from holding Hubei Geoway Investment or generate 16.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Hubei Geoway Investment  vs.  Everdisplay Optronics Shanghai

Hubei Geoway Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Geoway Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Geoway sustained solid returns over the last few months and may actually be approaching a breakup point.

Everdisplay Optronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Everdisplay Optronics Shanghai are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Everdisplay Optronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Geoway and Everdisplay Optronics

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

The idea behind Hubei Geoway Investment and Everdisplay Optronics Shanghai 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.