Correlation Between Automobile and Hannong Chemicals
Can any of the company-specific risk be diversified away by investing in both Automobile and Hannong Chemicals 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 Automobile and Hannong Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automobile Pc and Hannong Chemicals, you can compare the effects of market volatilities on Automobile and Hannong Chemicals 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 Automobile with a short position of Hannong Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automobile and Hannong Chemicals.
Diversification Opportunities for Automobile and Hannong Chemicals
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Automobile and Hannong is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals and Automobile 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 Automobile Pc are associated (or correlated) with Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of Automobile i.e., Automobile and Hannong Chemicals go up and down completely randomly.
Pair Corralation between Automobile and Hannong Chemicals
Assuming the 90 days trading horizon Automobile Pc is expected to generate 1.41 times more return on investment than Hannong Chemicals. However, Automobile is 1.41 times more volatile than Hannong Chemicals. It trades about 0.04 of its potential returns per unit of risk. Hannong Chemicals is currently generating about -0.3 per unit of risk. If you would invest 68,000 in Automobile Pc on August 29, 2024 and sell it today you would earn a total of 1,000.00 from holding Automobile Pc or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automobile Pc vs. Hannong Chemicals
Performance |
| Timeline |
| Automobile Pc |
| Hannong Chemicals |
Automobile and Hannong Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automobile and Hannong Chemicals
The main advantage of trading using opposite Automobile and Hannong Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automobile position performs unexpectedly, Hannong Chemicals 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 Hannong Chemicals will offset losses from the drop in Hannong Chemicals' long position.| Automobile vs. Hanwha InvestmentSecurities Co | Automobile vs. Sangsin Energy Display | Automobile vs. Atinum Investment Co | Automobile vs. LB 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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