Correlation Between Hainan Pearl and Shanghai Yaoji

Can any of the company-specific risk be diversified away by investing in both Hainan Pearl and Shanghai Yaoji 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 Hainan Pearl and Shanghai Yaoji into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hainan Pearl River and Shanghai Yaoji Playing, you can compare the effects of market volatilities on Hainan Pearl and Shanghai Yaoji 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 Hainan Pearl with a short position of Shanghai Yaoji. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Pearl and Shanghai Yaoji.

Diversification Opportunities for Hainan Pearl and Shanghai Yaoji

0.59

Correlation Coefficient

Hainan Pearl  Shanghai Yaoji

Very weak diversification

The 3 months correlation between Hainan and Shanghai is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Pearl River and Shanghai Yaoji Playing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yaoji Playing and Hainan Pearl 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 Hainan Pearl River are associated (or correlated) with Shanghai Yaoji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yaoji Playing has no effect on the direction of Hainan Pearl i.e., Hainan Pearl and Shanghai Yaoji go up and down completely randomly.

Pair Corralation between Hainan Pearl and Shanghai Yaoji

Assuming the 90 days trading horizon Hainan Pearl River is expected to generate 0.74 times more return on investment than Shanghai Yaoji. However, Hainan Pearl River is 1.35 times less risky than Shanghai Yaoji. It trades about -0.38 of its potential returns per unit of risk. Shanghai Yaoji Playing is currently generating about -0.48 per unit of risk. If you would invest  707.00  in Hainan Pearl River on October 12, 2024 and sell it today you would lose (117.00) from holding Hainan Pearl River or give up 16.55% of portfolio value over 90 days.

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

Hainan Pearl River  vs.  Shanghai Yaoji Playing

Hainan Pearl River

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hainan Pearl River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shanghai Yaoji Playing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yaoji Playing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Yaoji may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hainan Pearl and Shanghai Yaoji

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

The idea behind Hainan Pearl River and Shanghai Yaoji Playing 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.