Correlation Between Hefei Metalforming and SI TECH

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

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

Diversification Opportunities for Hefei Metalforming and SI TECH

0.51

Correlation Coefficient

Hefei Metalforming  SI TECH

Very weak diversification

The 3 months correlation between Hefei and 300608 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hefei Metalforming Mach and SI TECH Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SI TECH Information and Hefei Metalforming 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 Hefei Metalforming Mach are associated (or correlated) with SI TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SI TECH Information has no effect on the direction of Hefei Metalforming i.e., Hefei Metalforming and SI TECH go up and down completely randomly.

Pair Corralation between Hefei Metalforming and SI TECH

Assuming the 90 days trading horizon Hefei Metalforming Mach is expected to generate 0.71 times more return on investment than SI TECH. However, Hefei Metalforming Mach is 1.42 times less risky than SI TECH. It trades about 0.05 of its potential returns per unit of risk. SI TECH Information Technology is currently generating about -0.03 per unit of risk. If you would invest  666.00  in Hefei Metalforming Mach on September 29, 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

Hefei Metalforming Mach  vs.  SI TECH Information Technology

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.

SI TECH Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SI TECH Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hefei Metalforming and SI TECH

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

The idea behind Hefei Metalforming Mach and SI TECH Information Technology 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.