Correlation Between Hi Lai and Softstar Entertainment
Can any of the company-specific risk be diversified away by investing in both Hi Lai and Softstar Entertainment 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 Hi Lai and Softstar Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hi Lai Foods Co and Softstar Entertainment, you can compare the effects of market volatilities on Hi Lai and Softstar Entertainment 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 Hi Lai with a short position of Softstar Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hi Lai and Softstar Entertainment.
Diversification Opportunities for Hi Lai and Softstar Entertainment
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 1268 and Softstar is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hi Lai Foods Co and Softstar Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softstar Entertainment and Hi Lai 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 Hi Lai Foods Co are associated (or correlated) with Softstar Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softstar Entertainment has no effect on the direction of Hi Lai i.e., Hi Lai and Softstar Entertainment go up and down completely randomly.
Pair Corralation between Hi Lai and Softstar Entertainment
Assuming the 90 days trading horizon Hi Lai Foods Co is expected to generate 0.63 times more return on investment than Softstar Entertainment. However, Hi Lai Foods Co is 1.58 times less risky than Softstar Entertainment. It trades about 0.03 of its potential returns per unit of risk. Softstar Entertainment is currently generating about 0.01 per unit of risk. If you would invest 12,503 in Hi Lai Foods Co on October 28, 2024 and sell it today you would earn a total of 2,747 from holding Hi Lai Foods Co or generate 21.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hi Lai Foods Co vs. Softstar Entertainment
Performance |
| Timeline |
| Hi Lai Foods |
| Softstar Entertainment |
Hi Lai and Softstar Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hi Lai and Softstar Entertainment
The main advantage of trading using opposite Hi Lai and Softstar Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hi Lai position performs unexpectedly, Softstar Entertainment 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 Softstar Entertainment will offset losses from the drop in Softstar Entertainment's long position.The idea behind Hi Lai Foods Co and Softstar Entertainment 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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