Correlation Between Hoshine Silicon and Dongguan Aohai

Can any of the company-specific risk be diversified away by investing in both Hoshine Silicon and Dongguan Aohai 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 Hoshine Silicon and Dongguan Aohai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hoshine Silicon Ind and Dongguan Aohai Technology, you can compare the effects of market volatilities on Hoshine Silicon and Dongguan Aohai 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 Hoshine Silicon with a short position of Dongguan Aohai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoshine Silicon and Dongguan Aohai.

Diversification Opportunities for Hoshine Silicon and Dongguan Aohai

0.55

Correlation Coefficient

Hoshine Silicon  Dongguan Aohai

Very weak diversification

The 3 months correlation between Hoshine and Dongguan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hoshine Silicon Ind and Dongguan Aohai Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Aohai Technology and Hoshine Silicon 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 Hoshine Silicon Ind are associated (or correlated) with Dongguan Aohai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Aohai Technology has no effect on the direction of Hoshine Silicon i.e., Hoshine Silicon and Dongguan Aohai go up and down completely randomly.

Pair Corralation between Hoshine Silicon and Dongguan Aohai

Assuming the 90 days trading horizon Hoshine Silicon Ind is expected to under-perform the Dongguan Aohai. But the stock apears to be less risky and, when comparing its historical volatility, Hoshine Silicon Ind is 1.46 times less risky than Dongguan Aohai. The stock trades about -0.01 of its potential returns per unit of risk. The Dongguan Aohai Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,941  in Dongguan Aohai Technology on September 28, 2024 and sell it today you would earn a total of  1,131  from holding Dongguan Aohai Technology or generate 38.46% return on investment over 90 days.

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

Hoshine Silicon Ind  vs.  Dongguan Aohai Technology

Hoshine Silicon Ind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dongguan Aohai Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dongguan Aohai Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongguan Aohai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hoshine Silicon and Dongguan Aohai

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

The idea behind Hoshine Silicon Ind and Dongguan Aohai 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.