Correlation Between HUAQIN TECHNOLOGY and Gansu Yasheng

Can any of the company-specific risk be diversified away by investing in both HUAQIN TECHNOLOGY and Gansu Yasheng 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 HUAQIN TECHNOLOGY and Gansu Yasheng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HUAQIN TECHNOLOGY LTD and Gansu Yasheng Industrial, you can compare the effects of market volatilities on HUAQIN TECHNOLOGY and Gansu Yasheng 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 HUAQIN TECHNOLOGY with a short position of Gansu Yasheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUAQIN TECHNOLOGY and Gansu Yasheng.

Diversification Opportunities for HUAQIN TECHNOLOGY and Gansu Yasheng

0.93

Correlation Coefficient

HUAQIN TECHNOLOGY  Gansu Yasheng

Almost no diversification

The 3 months correlation between HUAQIN and Gansu is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding HUAQIN TECHNOLOGY LTD and Gansu Yasheng Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Yasheng Industrial and HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY LTD are associated (or correlated) with Gansu Yasheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Yasheng Industrial has no effect on the direction of HUAQIN TECHNOLOGY i.e., HUAQIN TECHNOLOGY and Gansu Yasheng go up and down completely randomly.

Pair Corralation between HUAQIN TECHNOLOGY and Gansu Yasheng

Assuming the 90 days trading horizon HUAQIN TECHNOLOGY LTD is expected to generate 1.26 times more return on investment than Gansu Yasheng. However, HUAQIN TECHNOLOGY is 1.26 times more volatile than Gansu Yasheng Industrial. It trades about 0.21 of its potential returns per unit of risk. Gansu Yasheng Industrial is currently generating about 0.18 per unit of risk. If you would invest  4,324  in HUAQIN TECHNOLOGY LTD on September 6, 2024 and sell it today you would earn a total of  1,959  from holding HUAQIN TECHNOLOGY LTD or generate 45.31% return on investment over 90 days.

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

HUAQIN TECHNOLOGY LTD  vs.  Gansu Yasheng Industrial

HUAQIN TECHNOLOGY LTD

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HUAQIN TECHNOLOGY LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HUAQIN TECHNOLOGY sustained solid returns over the last few months and may actually be approaching a breakup point.

Gansu Yasheng Industrial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Yasheng Industrial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Yasheng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUAQIN TECHNOLOGY and Gansu Yasheng

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

The idea behind HUAQIN TECHNOLOGY LTD and Gansu Yasheng Industrial 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.