Correlation Between Dow and Hongli Group
Can any of the company-specific risk be diversified away by investing in both Dow and Hongli Group 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 Dow and Hongli Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Inc and Hongli Group Ordinary, you can compare the effects of market volatilities on Dow and Hongli Group 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 Dow with a short position of Hongli Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and Hongli Group.
Diversification Opportunities for Dow and Hongli Group
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Hongli is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary and Dow 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 Dow Inc are associated (or correlated) with Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of Dow i.e., Dow and Hongli Group go up and down completely randomly.
Pair Corralation between Dow and Hongli Group
Considering the 90-day investment horizon Dow Inc is expected to under-perform the Hongli Group. But the stock apears to be less risky and, when comparing its historical volatility, Dow Inc is 2.33 times less risky than Hongli Group. The stock trades about -0.1 of its potential returns per unit of risk. The Hongli Group Ordinary is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 131.00 in Hongli Group Ordinary on November 1, 2024 and sell it today you would lose (3.00) from holding Hongli Group Ordinary or give up 2.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Inc vs. Hongli Group Ordinary
Performance |
| Timeline |
| Dow Inc |
| Hongli Group Ordinary |
Dow and Hongli Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow and Hongli Group
The main advantage of trading using opposite Dow and Hongli Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow position performs unexpectedly, Hongli Group 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 Hongli Group will offset losses from the drop in Hongli Group's long position.The idea behind Dow Inc and Hongli Group Ordinary 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.| Hongli Group vs. EMCOR Group | Hongli Group vs. Sonida Senior Living | Hongli Group vs. Tandem Diabetes Care | Hongli Group vs. Xtant Medical Holdings |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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