Correlation Between Century Wind and Handa Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Century Wind and Handa Pharmaceuticals 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 Century Wind and Handa Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Wind Power and Handa Pharmaceuticals, you can compare the effects of market volatilities on Century Wind and Handa Pharmaceuticals 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 Century Wind with a short position of Handa Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Wind and Handa Pharmaceuticals.
Diversification Opportunities for Century Wind and Handa Pharmaceuticals
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Century and Handa is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Century Wind Power and Handa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Handa Pharmaceuticals and Century Wind 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 Century Wind Power are associated (or correlated) with Handa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Handa Pharmaceuticals has no effect on the direction of Century Wind i.e., Century Wind and Handa Pharmaceuticals go up and down completely randomly.
Pair Corralation between Century Wind and Handa Pharmaceuticals
Assuming the 90 days trading horizon Century Wind Power is expected to under-perform the Handa Pharmaceuticals. In addition to that, Century Wind is 1.27 times more volatile than Handa Pharmaceuticals. It trades about -0.11 of its total potential returns per unit of risk. Handa Pharmaceuticals is currently generating about 0.07 per unit of volatility. If you would invest 7,700 in Handa Pharmaceuticals on November 5, 2024 and sell it today you would earn a total of 190.00 from holding Handa Pharmaceuticals or generate 2.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Wind Power vs. Handa Pharmaceuticals
Performance |
| Timeline |
| Century Wind Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Handa Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Century Wind and Handa Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Wind and Handa Pharmaceuticals
The main advantage of trading using opposite Century Wind and Handa Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Wind position performs unexpectedly, Handa Pharmaceuticals 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 Handa Pharmaceuticals will offset losses from the drop in Handa Pharmaceuticals' long position.The idea behind Century Wind Power and Handa Pharmaceuticals 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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