Correlation Between Hua Hong and ECHO INVESTMENT

Can any of the company-specific risk be diversified away by investing in both Hua Hong and ECHO INVESTMENT 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 Hua Hong and ECHO INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hua Hong Semiconductor and ECHO INVESTMENT ZY, you can compare the effects of market volatilities on Hua Hong and ECHO INVESTMENT 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 Hua Hong with a short position of ECHO INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Hong and ECHO INVESTMENT.

Diversification Opportunities for Hua Hong and ECHO INVESTMENT

0.21

Correlation Coefficient

Hua Hong  ECHO INVESTMENT

Modest diversification

The 3 months correlation between Hua and ECHO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY and Hua Hong 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 Hua Hong Semiconductor are associated (or correlated) with ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of Hua Hong i.e., Hua Hong and ECHO INVESTMENT go up and down completely randomly.

Pair Corralation between Hua Hong and ECHO INVESTMENT

Assuming the 90 days horizon Hua Hong is expected to generate 1.4 times less return on investment than ECHO INVESTMENT. In addition to that, Hua Hong is 1.89 times more volatile than ECHO INVESTMENT ZY. It trades about 0.07 of its total potential returns per unit of risk. ECHO INVESTMENT ZY is currently generating about 0.2 per unit of volatility. If you would invest  113.00  in ECHO INVESTMENT ZY on April 22, 2025 and sell it today you would earn a total of  7.00  from holding ECHO INVESTMENT ZY or generate 6.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hua Hong Semiconductor  vs.  ECHO INVESTMENT ZY

Hua Hong Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hua Hong Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hua Hong is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ECHO INVESTMENT ZY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hua Hong and ECHO INVESTMENT

The main advantage of trading using opposite Hua Hong and ECHO INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Hong position performs unexpectedly, ECHO INVESTMENT 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 ECHO INVESTMENT will offset losses from the drop in ECHO INVESTMENT's long position.

The idea behind Hua Hong Semiconductor and ECHO INVESTMENT ZY 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.