Correlation Between Caihong Display and HUAQIN TECHNOLOGY
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By analyzing existing cross correlation between Caihong Display Devices and HUAQIN TECHNOLOGY LTD, you can compare the effects of market volatilities on Caihong Display and HUAQIN TECHNOLOGY 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 Caihong Display with a short position of HUAQIN TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caihong Display and HUAQIN TECHNOLOGY.
Diversification Opportunities for Caihong Display and HUAQIN TECHNOLOGY
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caihong and HUAQIN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caihong Display Devices and HUAQIN TECHNOLOGY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUAQIN TECHNOLOGY LTD and Caihong Display 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 Caihong Display Devices are associated (or correlated) with HUAQIN TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUAQIN TECHNOLOGY LTD has no effect on the direction of Caihong Display i.e., Caihong Display and HUAQIN TECHNOLOGY go up and down completely randomly.
Pair Corralation between Caihong Display and HUAQIN TECHNOLOGY
Assuming the 90 days trading horizon Caihong Display is expected to generate 2.49 times less return on investment than HUAQIN TECHNOLOGY. But when comparing it to its historical volatility, Caihong Display Devices is 1.1 times less risky than HUAQIN TECHNOLOGY. It trades about 0.07 of its potential returns per unit of risk. HUAQIN TECHNOLOGY LTD is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 7,199 in HUAQIN TECHNOLOGY LTD on November 8, 2024 and sell it today you would earn a total of 601.00 from holding HUAQIN TECHNOLOGY LTD or generate 8.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.12% |
| Values | Daily Returns |
Caihong Display Devices vs. HUAQIN TECHNOLOGY LTD
Performance |
| Timeline |
| Caihong Display Devices |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| HUAQIN TECHNOLOGY LTD |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Caihong Display and HUAQIN TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caihong Display and HUAQIN TECHNOLOGY
The main advantage of trading using opposite Caihong Display and HUAQIN TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caihong Display position performs unexpectedly, HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY will offset losses from the drop in HUAQIN TECHNOLOGY's long position.The idea behind Caihong Display Devices and HUAQIN TECHNOLOGY LTD 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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