Correlation Between HUAQIN TECHNOLOGY and WuXi Xinje

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

Diversification Opportunities for HUAQIN TECHNOLOGY and WuXi Xinje

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between HUAQIN and WuXi is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding HUAQIN TECHNOLOGY LTD and WuXi Xinje Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi Xinje Electric and HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY LTD are associated (or correlated) with WuXi Xinje. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi Xinje Electric has no effect on the direction of HUAQIN TECHNOLOGY i.e., HUAQIN TECHNOLOGY and WuXi Xinje go up and down completely randomly.

Pair Corralation between HUAQIN TECHNOLOGY and WuXi Xinje

Assuming the 90 days trading horizon HUAQIN TECHNOLOGY LTD is expected to generate 1.08 times more return on investment than WuXi Xinje. However, HUAQIN TECHNOLOGY is 1.08 times more volatile than WuXi Xinje Electric. It trades about 0.04 of its potential returns per unit of risk. WuXi Xinje Electric is currently generating about 0.0 per unit of risk. If you would invest  5,128  in HUAQIN TECHNOLOGY LTD on October 15, 2024 and sell it today you would earn a total of  1,759  from holding HUAQIN TECHNOLOGY LTD or generate 34.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy72.8%
ValuesDaily Returns

HUAQIN TECHNOLOGY LTD  vs.  WuXi Xinje Electric

 Performance 
       Timeline  
HUAQIN TECHNOLOGY LTD 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in HUAQIN TECHNOLOGY LTD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HUAQIN TECHNOLOGY sustained solid returns over the last few months and may actually be approaching a breakup point.
WuXi Xinje Electric 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WuXi Xinje Electric are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WuXi Xinje sustained solid returns over the last few months and may actually be approaching a breakup point.

HUAQIN TECHNOLOGY and WuXi Xinje Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HUAQIN TECHNOLOGY and WuXi Xinje

The main advantage of trading using opposite HUAQIN TECHNOLOGY and WuXi Xinje positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUAQIN TECHNOLOGY position performs unexpectedly, WuXi Xinje 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 WuXi Xinje will offset losses from the drop in WuXi Xinje's long position.
The idea behind HUAQIN TECHNOLOGY LTD and WuXi Xinje Electric 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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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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