Correlation Between Hua Eng and Hong Tai
Can any of the company-specific risk be diversified away by investing in both Hua Eng and Hong Tai 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 Hua Eng and Hong Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hua Eng Wire and Hong Tai Electric, you can compare the effects of market volatilities on Hua Eng and Hong Tai 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 Hua Eng with a short position of Hong Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Eng and Hong Tai.
Diversification Opportunities for Hua Eng and Hong Tai
Poor diversification
The 3 months correlation between Hua and Hong is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hua Eng Wire and Hong Tai Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Tai Electric and Hua Eng 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 Hua Eng Wire are associated (or correlated) with Hong Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Tai Electric has no effect on the direction of Hua Eng i.e., Hua Eng and Hong Tai go up and down completely randomly.
Pair Corralation between Hua Eng and Hong Tai
Assuming the 90 days trading horizon Hua Eng Wire is expected to generate 2.45 times more return on investment than Hong Tai. However, Hua Eng is 2.45 times more volatile than Hong Tai Electric. It trades about 0.3 of its potential returns per unit of risk. Hong Tai Electric is currently generating about 0.53 per unit of risk. If you would invest 2,495 in Hua Eng Wire on November 18, 2024 and sell it today you would earn a total of 270.00 from holding Hua Eng Wire or generate 10.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hua Eng Wire vs. Hong Tai Electric
Performance |
| Timeline |
| Hua Eng Wire |
| Hong Tai Electric |
Hua Eng and Hong Tai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hua Eng and Hong Tai
The main advantage of trading using opposite Hua Eng and Hong Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Eng position performs unexpectedly, Hong Tai 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 Hong Tai will offset losses from the drop in Hong Tai's long position.| Hua Eng vs. Walsin Lihwa Corp | Hua Eng vs. Ta Ya Electric | Hua Eng vs. Hong Tai Electric | Hua Eng vs. Sampo Corp |
| Hong Tai vs. Ta Ya Electric | Hong Tai vs. Hua Eng Wire | Hong Tai vs. Walsin Lihwa Corp | Hong Tai vs. Sampo Corp |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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