Correlation Between Hunan Mendale and Wuxi Chemical
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By analyzing existing cross correlation between Hunan Mendale Hometextile and Wuxi Chemical Equipment, you can compare the effects of market volatilities on Hunan Mendale and Wuxi Chemical 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 Hunan Mendale with a short position of Wuxi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Mendale and Wuxi Chemical.
Diversification Opportunities for Hunan Mendale and Wuxi Chemical
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hunan and Wuxi is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Mendale Hometextile and Wuxi Chemical Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Chemical Equipment and Hunan Mendale 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 Hunan Mendale Hometextile are associated (or correlated) with Wuxi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Chemical Equipment has no effect on the direction of Hunan Mendale i.e., Hunan Mendale and Wuxi Chemical go up and down completely randomly.
Pair Corralation between Hunan Mendale and Wuxi Chemical
Assuming the 90 days trading horizon Hunan Mendale Hometextile is expected to under-perform the Wuxi Chemical. In addition to that, Hunan Mendale is 1.22 times more volatile than Wuxi Chemical Equipment. It trades about -0.02 of its total potential returns per unit of risk. Wuxi Chemical Equipment is currently generating about -0.01 per unit of volatility. If you would invest 4,707 in Wuxi Chemical Equipment on November 8, 2024 and sell it today you would lose (1,237) from holding Wuxi Chemical Equipment or give up 26.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hunan Mendale Hometextile vs. Wuxi Chemical Equipment
Performance |
| Timeline |
| Hunan Mendale Hometextile |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Wuxi Chemical Equipment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Hunan Mendale and Wuxi Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hunan Mendale and Wuxi Chemical
The main advantage of trading using opposite Hunan Mendale and Wuxi Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunan Mendale position performs unexpectedly, Wuxi Chemical 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 Wuxi Chemical will offset losses from the drop in Wuxi Chemical's long position.The idea behind Hunan Mendale Hometextile and Wuxi Chemical Equipment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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