Correlation Between Hotai and Zinwell
Can any of the company-specific risk be diversified away by investing in both Hotai and Zinwell 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 Zinwell 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 Zinwell, you can compare the effects of market volatilities on Hotai and Zinwell 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 Zinwell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotai and Zinwell.
Diversification Opportunities for Hotai and Zinwell
Poor diversification
The 3 months correlation between Hotai and Zinwell is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hotai Motor Co and Zinwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zinwell 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 Zinwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zinwell has no effect on the direction of Hotai i.e., Hotai and Zinwell go up and down completely randomly.
Pair Corralation between Hotai and Zinwell
Assuming the 90 days trading horizon Hotai Motor Co is expected to under-perform the Zinwell. But the stock apears to be less risky and, when comparing its historical volatility, Hotai Motor Co is 1.4 times less risky than Zinwell. The stock trades about -0.17 of its potential returns per unit of risk. The Zinwell is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 1,775 in Zinwell on September 1, 2024 and sell it today you would lose (85.00) from holding Zinwell or give up 4.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Hotai Motor Co vs. Zinwell
Performance |
| Timeline |
| Hotai Motor |
| Zinwell |
Hotai and Zinwell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hotai and Zinwell
The main advantage of trading using opposite Hotai and Zinwell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotai position performs unexpectedly, Zinwell 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 Zinwell will offset losses from the drop in Zinwell's long position.| Hotai vs. President Chain Store | Hotai vs. Formosa Petrochemical Corp | Hotai vs. Cheng Shin Rubber | Hotai vs. Formosa Chemicals Fibre |
| Zinwell vs. Clevo Co | Zinwell vs. D Link Corp | Zinwell vs. Cheng Uei Precision | Zinwell vs. Senao International Co |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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