Correlation Between Hengli Petrochemical and Allied Machinery
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By analyzing existing cross correlation between Hengli Petrochemical Co and Allied Machinery Co, you can compare the effects of market volatilities on Hengli Petrochemical and Allied Machinery 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 Hengli Petrochemical with a short position of Allied Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Petrochemical and Allied Machinery.
Diversification Opportunities for Hengli Petrochemical and Allied Machinery
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hengli and Allied is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Petrochemical Co and Allied Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Machinery and Hengli Petrochemical 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 Hengli Petrochemical Co are associated (or correlated) with Allied Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Machinery has no effect on the direction of Hengli Petrochemical i.e., Hengli Petrochemical and Allied Machinery go up and down completely randomly.
Pair Corralation between Hengli Petrochemical and Allied Machinery
Assuming the 90 days trading horizon Hengli Petrochemical Co is expected to under-perform the Allied Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Hengli Petrochemical Co is 6.99 times less risky than Allied Machinery. The stock trades about -0.01 of its potential returns per unit of risk. The Allied Machinery Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,819 in Allied Machinery Co on November 7, 2024 and sell it today you would earn a total of 172.00 from holding Allied Machinery Co or generate 9.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hengli Petrochemical Co vs. Allied Machinery Co
Performance |
| Timeline |
| Hengli Petrochemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Allied Machinery |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Hengli Petrochemical and Allied Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hengli Petrochemical and Allied Machinery
The main advantage of trading using opposite Hengli Petrochemical and Allied Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengli Petrochemical position performs unexpectedly, Allied Machinery 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 Allied Machinery will offset losses from the drop in Allied Machinery's long position.The idea behind Hengli Petrochemical Co and Allied Machinery Co 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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