Correlation Between Dr Peng and Huayi Brothers

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Can any of the company-specific risk be diversified away by investing in both Dr Peng and Huayi Brothers 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 Dr Peng and Huayi Brothers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dr Peng Telecom and Huayi Brothers Media, you can compare the effects of market volatilities on Dr Peng and Huayi Brothers 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 Dr Peng with a short position of Huayi Brothers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Peng and Huayi Brothers.

Diversification Opportunities for Dr Peng and Huayi Brothers

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between 600804 and Huayi is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and Huayi Brothers Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huayi Brothers Media and Dr Peng 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 Dr Peng Telecom are associated (or correlated) with Huayi Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huayi Brothers Media has no effect on the direction of Dr Peng i.e., Dr Peng and Huayi Brothers go up and down completely randomly.

Pair Corralation between Dr Peng and Huayi Brothers

Assuming the 90 days trading horizon Dr Peng Telecom is expected to generate 1.29 times more return on investment than Huayi Brothers. However, Dr Peng is 1.29 times more volatile than Huayi Brothers Media. It trades about -0.02 of its potential returns per unit of risk. Huayi Brothers Media is currently generating about -0.13 per unit of risk. If you would invest  187.00  in Dr Peng Telecom on October 29, 2024 and sell it today you would lose (5.00) from holding Dr Peng Telecom or give up 2.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dr Peng Telecom  vs.  Huayi Brothers Media

 Performance 
       Timeline  
Dr Peng Telecom 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.
Huayi Brothers Media 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Huayi Brothers Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dr Peng and Huayi Brothers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dr Peng and Huayi Brothers

The main advantage of trading using opposite Dr Peng and Huayi Brothers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dr Peng position performs unexpectedly, Huayi Brothers 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 Huayi Brothers will offset losses from the drop in Huayi Brothers' long position.
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The idea behind Dr Peng Telecom and Huayi Brothers Media 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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