Correlation Between Dawushan Farm and Huang Hsiang

Can any of the company-specific risk be diversified away by investing in both Dawushan Farm and Huang Hsiang 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 Dawushan Farm and Huang Hsiang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dawushan Farm Tech and Huang Hsiang Construction, you can compare the effects of market volatilities on Dawushan Farm and Huang Hsiang 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 Dawushan Farm with a short position of Huang Hsiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dawushan Farm and Huang Hsiang.

Diversification Opportunities for Dawushan Farm and Huang Hsiang

-0.26

Correlation Coefficient

Dawushan Farm  Huang Hsiang

Very good diversification

The 3 months correlation between Dawushan and Huang is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dawushan Farm Tech and Huang Hsiang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huang Hsiang Construction and Dawushan Farm 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 Dawushan Farm Tech are associated (or correlated) with Huang Hsiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huang Hsiang Construction has no effect on the direction of Dawushan Farm i.e., Dawushan Farm and Huang Hsiang go up and down completely randomly.

Pair Corralation between Dawushan Farm and Huang Hsiang

Assuming the 90 days trading horizon Dawushan Farm Tech is expected to under-perform the Huang Hsiang. But the stock apears to be less risky and, when comparing its historical volatility, Dawushan Farm Tech is 1.83 times less risky than Huang Hsiang. The stock trades about -0.02 of its potential returns per unit of risk. The Huang Hsiang Construction is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,380  in Huang Hsiang Construction on September 15, 2024 and sell it today you would earn a total of  30.00  from holding Huang Hsiang Construction or generate 0.47% return on investment over 90 days.

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

Dawushan Farm Tech  vs.  Huang Hsiang Construction

Dawushan Farm Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dawushan Farm Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Dawushan Farm is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Huang Hsiang Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Huang Hsiang Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Huang Hsiang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dawushan Farm and Huang Hsiang

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

The idea behind Dawushan Farm Tech and Huang Hsiang Construction 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.