Correlation Between Parade Technologies and HUA YU
Can any of the company-specific risk be diversified away by investing in both Parade Technologies and HUA YU 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 Parade Technologies and HUA YU into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parade Technologies and HUA YU LIEN, you can compare the effects of market volatilities on Parade Technologies and HUA YU 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 Parade Technologies with a short position of HUA YU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parade Technologies and HUA YU.
Diversification Opportunities for Parade Technologies and HUA YU
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Parade and HUA is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Parade Technologies and HUA YU LIEN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUA YU LIEN and Parade Technologies 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 Parade Technologies are associated (or correlated) with HUA YU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUA YU LIEN has no effect on the direction of Parade Technologies i.e., Parade Technologies and HUA YU go up and down completely randomly.
Pair Corralation between Parade Technologies and HUA YU
Assuming the 90 days trading horizon Parade Technologies is expected to generate 0.97 times more return on investment than HUA YU. However, Parade Technologies is 1.03 times less risky than HUA YU. It trades about 0.17 of its potential returns per unit of risk. HUA YU LIEN is currently generating about -0.14 per unit of risk. If you would invest 66,100 in Parade Technologies on September 5, 2024 and sell it today you would earn a total of 5,100 from holding Parade Technologies or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parade Technologies vs. HUA YU LIEN
Performance |
| Timeline |
| Parade Technologies |
| HUA YU LIEN |
Parade Technologies and HUA YU Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parade Technologies and HUA YU
The main advantage of trading using opposite Parade Technologies and HUA YU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parade Technologies position performs unexpectedly, HUA YU 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 HUA YU will offset losses from the drop in HUA YU's long position.The idea behind Parade Technologies and HUA YU LIEN 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.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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