Correlation Between Hims Hers and China Hongqiao

Can any of the company-specific risk be diversified away by investing in both Hims Hers and China Hongqiao 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 Hims Hers and China Hongqiao into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hims Hers Health and China Hongqiao Group, you can compare the effects of market volatilities on Hims Hers and China Hongqiao 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 Hims Hers with a short position of China Hongqiao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hims Hers and China Hongqiao.

Diversification Opportunities for Hims Hers and China Hongqiao

0.82

Correlation Coefficient

Hims Hers  China Hongqiao

Very poor diversification

The 3 months correlation between Hims and China is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hims Hers Health and China Hongqiao Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Hongqiao Group and Hims Hers 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 Hims Hers Health are associated (or correlated) with China Hongqiao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Hongqiao Group has no effect on the direction of Hims Hers i.e., Hims Hers and China Hongqiao go up and down completely randomly.

Pair Corralation between Hims Hers and China Hongqiao

Given the investment horizon of 90 days Hims Hers Health is expected to generate 9.93 times more return on investment than China Hongqiao. However, Hims Hers is 9.93 times more volatile than China Hongqiao Group. It trades about 0.13 of its potential returns per unit of risk. China Hongqiao Group is currently generating about 0.13 per unit of risk. If you would invest  1,644  in Hims Hers Health on September 22, 2024 and sell it today you would earn a total of  976.00  from holding Hims Hers Health or generate 59.37% return on investment over 90 days.

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

Hims Hers Health  vs.  China Hongqiao Group

Hims Hers Health

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hims Hers Health are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Hims Hers unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Hongqiao Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Hongqiao Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, China Hongqiao is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hims Hers and China Hongqiao

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

The idea behind Hims Hers Health and China Hongqiao 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.