Correlation Between Ambari Brands and Huadi International

Can any of the company-specific risk be diversified away by investing in both Ambari Brands and Huadi International 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 Ambari Brands and Huadi International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ambari Brands and Huadi International Group, you can compare the effects of market volatilities on Ambari Brands and Huadi International 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 Ambari Brands with a short position of Huadi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambari Brands and Huadi International.

Diversification Opportunities for Ambari Brands and Huadi International

0.02

Correlation Coefficient

Ambari Brands  Huadi International

Significant diversification

The 3 months correlation between Ambari and Huadi is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ambari Brands and Huadi International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huadi International and Ambari Brands 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 Ambari Brands are associated (or correlated) with Huadi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huadi International has no effect on the direction of Ambari Brands i.e., Ambari Brands and Huadi International go up and down completely randomly.

Pair Corralation between Ambari Brands and Huadi International

Assuming the 90 days horizon Ambari Brands is expected to under-perform the Huadi International. In addition to that, Ambari Brands is 3.18 times more volatile than Huadi International Group. It trades about -0.01 of its total potential returns per unit of risk. Huadi International Group is currently generating about -0.03 per unit of volatility. If you would invest  199.00  in Huadi International Group on September 17, 2024 and sell it today you would lose (32.00) from holding Huadi International Group or give up 16.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.88%
Values	Daily Returns

Ambari Brands  vs.  Huadi International Group

Ambari Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambari Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Huadi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huadi International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Ambari Brands and Huadi International

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

The idea behind Ambari Brands and Huadi International Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.