Correlation Between Huaneng Power and Cass Information

Can any of the company-specific risk be diversified away by investing in both Huaneng Power and Cass Information 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 Huaneng Power and Cass Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huaneng Power International and Cass Information Systems, you can compare the effects of market volatilities on Huaneng Power and Cass Information 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 Huaneng Power with a short position of Cass Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Power and Cass Information.

Diversification Opportunities for Huaneng Power and Cass Information

-0.52

Correlation Coefficient

Huaneng Power  Cass Information

Excellent diversification

The 3 months correlation between Huaneng and Cass is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Power International and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems and Huaneng Power 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 Huaneng Power International are associated (or correlated) with Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Huaneng Power i.e., Huaneng Power and Cass Information go up and down completely randomly.

Pair Corralation between Huaneng Power and Cass Information

Assuming the 90 days trading horizon Huaneng Power is expected to generate 1.48 times less return on investment than Cass Information. In addition to that, Huaneng Power is 1.66 times more volatile than Cass Information Systems. It trades about 0.05 of its total potential returns per unit of risk. Cass Information Systems is currently generating about 0.12 per unit of volatility. If you would invest  3,713  in Cass Information Systems on September 17, 2024 and sell it today you would earn a total of  487.00  from holding Cass Information Systems or generate 13.12% return on investment over 90 days.

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

Huaneng Power International  vs.  Cass Information Systems

Huaneng Power Intern

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huaneng Power International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Huaneng Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cass Information Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cass Information reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaneng Power and Cass Information

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

The idea behind Huaneng Power International and Cass Information Systems 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .