Correlation Between Hongli Group and United States

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

Diversification Opportunities for Hongli Group and United States

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hongli and United is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hongli Group Ordinary and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Hongli Group 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 Hongli Group Ordinary are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Hongli Group i.e., Hongli Group and United States go up and down completely randomly.

Pair Corralation between Hongli Group and United States

Considering the 90-day investment horizon Hongli Group Ordinary is expected to under-perform the United States. In addition to that, Hongli Group is 3.13 times more volatile than United States Steel. It trades about -0.24 of its total potential returns per unit of risk. United States Steel is currently generating about 0.16 per unit of volatility. If you would invest  3,887  in United States Steel on January 17, 2024 and sell it today you would earn a total of  195.00  from holding United States Steel or generate 5.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Hongli Group Ordinary  vs.  United States Steel

 Performance 
       Timeline  
Hongli Group Ordinary 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hongli Group Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
United States Steel 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Hongli Group and United States Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hongli Group and United States

The main advantage of trading using opposite Hongli Group and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongli Group position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.
The idea behind Hongli Group Ordinary and United States Steel 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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