Correlation Between Hoshine Silicon and Xingguang Agricultural

Can any of the company-specific risk be diversified away by investing in both Hoshine Silicon and Xingguang Agricultural 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 Xingguang Agricultural 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 Xingguang Agricultural Mach, you can compare the effects of market volatilities on Hoshine Silicon and Xingguang Agricultural 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 Xingguang Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoshine Silicon and Xingguang Agricultural.

Diversification Opportunities for Hoshine Silicon and Xingguang Agricultural

0.88

Correlation Coefficient

Hoshine Silicon  Xingguang Agricultural

Very poor diversification

The 3 months correlation between Hoshine and Xingguang is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hoshine Silicon Ind and Xingguang Agricultural Mach in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xingguang Agricultural 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 Xingguang Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xingguang Agricultural has no effect on the direction of Hoshine Silicon i.e., Hoshine Silicon and Xingguang Agricultural go up and down completely randomly.

Pair Corralation between Hoshine Silicon and Xingguang Agricultural

Assuming the 90 days trading horizon Hoshine Silicon is expected to generate 1.73 times less return on investment than Xingguang Agricultural. In addition to that, Hoshine Silicon is 1.02 times more volatile than Xingguang Agricultural Mach. It trades about 0.11 of its total potential returns per unit of risk. Xingguang Agricultural Mach is currently generating about 0.2 per unit of volatility. If you would invest  651.00  in Xingguang Agricultural Mach on September 4, 2024 and sell it today you would earn a total of  263.00  from holding Xingguang Agricultural Mach or generate 40.4% return on investment over 90 days.

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

Hoshine Silicon Ind  vs.  Xingguang Agricultural Mach

Hoshine Silicon Ind

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hoshine Silicon Ind are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hoshine Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.

Xingguang Agricultural

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xingguang Agricultural Mach are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xingguang Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hoshine Silicon and Xingguang Agricultural

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

The idea behind Hoshine Silicon Ind and Xingguang Agricultural Mach 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.