Correlation Between Cultural Investment and Huizhou Speed

Can any of the company-specific risk be diversified away by investing in both Cultural Investment and Huizhou Speed 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 Cultural Investment and Huizhou Speed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cultural Investment Holdings and Huizhou Speed Wireless, you can compare the effects of market volatilities on Cultural Investment and Huizhou Speed 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 Cultural Investment with a short position of Huizhou Speed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cultural Investment and Huizhou Speed.

Diversification Opportunities for Cultural Investment and Huizhou Speed

0.64

Correlation Coefficient

Cultural Investment  Huizhou Speed

Poor diversification

The 3 months correlation between Cultural and Huizhou is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cultural Investment Holdings and Huizhou Speed Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huizhou Speed Wireless and Cultural Investment 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 Cultural Investment Holdings are associated (or correlated) with Huizhou Speed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huizhou Speed Wireless has no effect on the direction of Cultural Investment i.e., Cultural Investment and Huizhou Speed go up and down completely randomly.

Pair Corralation between Cultural Investment and Huizhou Speed

Assuming the 90 days trading horizon Cultural Investment Holdings is expected to generate 1.33 times more return on investment than Huizhou Speed. However, Cultural Investment is 1.33 times more volatile than Huizhou Speed Wireless. It trades about 0.01 of its potential returns per unit of risk. Huizhou Speed Wireless is currently generating about -0.08 per unit of risk. If you would invest  221.00  in Cultural Investment Holdings on September 29, 2024 and sell it today you would lose (1.00) from holding Cultural Investment Holdings or give up 0.45% of portfolio value over 90 days.

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

Cultural Investment Holdings  vs.  Huizhou Speed Wireless

Cultural Investment

Risk-Adjusted Performance

3 of 100

Insignificant

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

Huizhou Speed Wireless

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huizhou Speed Wireless are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huizhou Speed sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cultural Investment and Huizhou Speed

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

The idea behind Cultural Investment Holdings and Huizhou Speed Wireless 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.