Correlation Between Hua Hong and Solstad Offshore

Can any of the company-specific risk be diversified away by investing in both Hua Hong and Solstad Offshore 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 Solstad Offshore 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 Solstad Offshore ASA, you can compare the effects of market volatilities on Hua Hong and Solstad Offshore 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 Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Hong and Solstad Offshore.

Diversification Opportunities for Hua Hong and Solstad Offshore

-0.17

Correlation Coefficient

Hua Hong  Solstad Offshore

Good diversification

The 3 months correlation between Hua and Solstad is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Hua Hong i.e., Hua Hong and Solstad Offshore go up and down completely randomly.

Pair Corralation between Hua Hong and Solstad Offshore

Assuming the 90 days horizon Hua Hong Semiconductor is expected to under-perform the Solstad Offshore. In addition to that, Hua Hong is 1.59 times more volatile than Solstad Offshore ASA. It trades about -0.01 of its total potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.23 per unit of volatility. If you would invest  313.00  in Solstad Offshore ASA on April 20, 2025 and sell it today you would earn a total of  105.00  from holding Solstad Offshore ASA or generate 33.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hua Hong Semiconductor  vs.  Solstad Offshore ASA

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.

Solstad Offshore ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hua Hong and Solstad Offshore

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

The idea behind Hua Hong Semiconductor and Solstad Offshore ASA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.