Correlation Between Hotai and Eclat Textile
Can any of the company-specific risk be diversified away by investing in both Hotai and Eclat Textile 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 Hotai and Eclat Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hotai Motor Co and Eclat Textile Co, you can compare the effects of market volatilities on Hotai and Eclat Textile 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 Hotai with a short position of Eclat Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotai and Eclat Textile.
Diversification Opportunities for Hotai and Eclat Textile
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hotai and Eclat is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hotai Motor Co and Eclat Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclat Textile and Hotai 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 Hotai Motor Co are associated (or correlated) with Eclat Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclat Textile has no effect on the direction of Hotai i.e., Hotai and Eclat Textile go up and down completely randomly.
Pair Corralation between Hotai and Eclat Textile
Assuming the 90 days trading horizon Hotai Motor Co is expected to under-perform the Eclat Textile. But the stock apears to be less risky and, when comparing its historical volatility, Hotai Motor Co is 1.63 times less risky than Eclat Textile. The stock trades about -0.18 of its potential returns per unit of risk. The Eclat Textile Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 52,900 in Eclat Textile Co on September 3, 2024 and sell it today you would earn a total of 100.00 from holding Eclat Textile Co or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hotai Motor Co vs. Eclat Textile Co
Performance |
| Timeline |
| Hotai Motor |
| Eclat Textile |
Hotai and Eclat Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hotai and Eclat Textile
The main advantage of trading using opposite Hotai and Eclat Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotai position performs unexpectedly, Eclat Textile 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 Eclat Textile will offset losses from the drop in Eclat Textile's long position.| Hotai vs. President Chain Store | Hotai vs. Formosa Petrochemical Corp | Hotai vs. Cheng Shin Rubber | Hotai vs. Formosa Chemicals Fibre |
| Eclat Textile vs. Makalot Industrial Co | Eclat Textile vs. Feng Tay Enterprises | Eclat Textile vs. President Chain Store | Eclat Textile vs. Uni President Enterprises 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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