Correlation Between HanS Laser and ChengDu Hi

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Can any of the company-specific risk be diversified away by investing in both HanS Laser and ChengDu Hi 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 HanS Laser and ChengDu Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HanS Laser Tech and ChengDu Hi Tech Development, you can compare the effects of market volatilities on HanS Laser and ChengDu Hi 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 HanS Laser with a short position of ChengDu Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of HanS Laser and ChengDu Hi.

Diversification Opportunities for HanS Laser and ChengDu Hi

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between HanS and ChengDu is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding HanS Laser Tech and ChengDu Hi Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChengDu Hi Tech and HanS Laser 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 HanS Laser Tech are associated (or correlated) with ChengDu Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChengDu Hi Tech has no effect on the direction of HanS Laser i.e., HanS Laser and ChengDu Hi go up and down completely randomly.

Pair Corralation between HanS Laser and ChengDu Hi

Assuming the 90 days trading horizon HanS Laser Tech is expected to generate 0.73 times more return on investment than ChengDu Hi. However, HanS Laser Tech is 1.38 times less risky than ChengDu Hi. It trades about 0.03 of its potential returns per unit of risk. ChengDu Hi Tech Development is currently generating about -0.06 per unit of risk. If you would invest  2,478  in HanS Laser Tech on October 26, 2024 and sell it today you would earn a total of  65.00  from holding HanS Laser Tech or generate 2.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

HanS Laser Tech  vs.  ChengDu Hi Tech Development

 Performance 
       Timeline  
HanS Laser Tech 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in HanS Laser Tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HanS Laser is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
ChengDu Hi Tech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ChengDu Hi Tech Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HanS Laser and ChengDu Hi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HanS Laser and ChengDu Hi

The main advantage of trading using opposite HanS Laser and ChengDu Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HanS Laser position performs unexpectedly, ChengDu Hi 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 ChengDu Hi will offset losses from the drop in ChengDu Hi's long position.
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The idea behind HanS Laser Tech and ChengDu Hi Tech Development 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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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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