Correlation Between Hi-Trend Tech(Shanghai)Co and Inner Mongolia

Can any of the company-specific risk be diversified away by investing in both Hi-Trend Tech(Shanghai)Co and Inner Mongolia 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 Hi-Trend Tech(Shanghai)Co and Inner Mongolia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hi Trend TechCo and Inner Mongolia Yuan, you can compare the effects of market volatilities on Hi-Trend Tech(Shanghai)Co and Inner Mongolia 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 Hi-Trend Tech(Shanghai)Co with a short position of Inner Mongolia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hi-Trend Tech(Shanghai)Co and Inner Mongolia.

Diversification Opportunities for Hi-Trend Tech(Shanghai)Co and Inner Mongolia

0.71

Correlation Coefficient

Hi-Trend Tech(Shanghai)Co  Inner Mongolia

Poor diversification

The 3 months correlation between Hi-Trend and Inner is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hi Trend TechCo and Inner Mongolia Yuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia Yuan and Hi-Trend Tech(Shanghai)Co 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 Hi Trend TechCo are associated (or correlated) with Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia Yuan has no effect on the direction of Hi-Trend Tech(Shanghai)Co i.e., Hi-Trend Tech(Shanghai)Co and Inner Mongolia go up and down completely randomly.

Pair Corralation between Hi-Trend Tech(Shanghai)Co and Inner Mongolia

Assuming the 90 days trading horizon Hi Trend TechCo is expected to generate 1.64 times more return on investment than Inner Mongolia. However, Hi-Trend Tech(Shanghai)Co is 1.64 times more volatile than Inner Mongolia Yuan. It trades about 0.12 of its potential returns per unit of risk. Inner Mongolia Yuan is currently generating about 0.02 per unit of risk. If you would invest  2,485  in Hi Trend TechCo on September 2, 2024 and sell it today you would earn a total of  800.00  from holding Hi Trend TechCo or generate 32.19% return on investment over 90 days.

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

Hi Trend TechCo  vs.  Inner Mongolia Yuan

Hi-Trend Tech(Shanghai)Co

Risk-Adjusted Performance

9 of 100

OK

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

Inner Mongolia Yuan

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inner Mongolia Yuan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Inner Mongolia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hi-Trend Tech(Shanghai)Co and Inner Mongolia

The main advantage of trading using opposite Hi-Trend Tech(Shanghai)Co and Inner Mongolia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hi-Trend Tech(Shanghai)Co position performs unexpectedly, Inner Mongolia 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 Inner Mongolia will offset losses from the drop in Inner Mongolia's long position.

The idea behind Hi Trend TechCo and Inner Mongolia Yuan 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.