Correlation Between Hainan Haiyao and China Minmetals

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

By analyzing existing cross correlation between Hainan Haiyao Co and China Minmetals Rare, you can compare the effects of market volatilities on Hainan Haiyao and China Minmetals 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 Haiyao with a short position of China Minmetals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Haiyao and China Minmetals.

Diversification Opportunities for Hainan Haiyao and China Minmetals

0.49

Correlation Coefficient

Hainan Haiyao  China Minmetals

Very weak diversification

The 3 months correlation between Hainan and China is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Haiyao Co and China Minmetals Rare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Minmetals Rare and Hainan Haiyao 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 Haiyao Co are associated (or correlated) with China Minmetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Minmetals Rare has no effect on the direction of Hainan Haiyao i.e., Hainan Haiyao and China Minmetals go up and down completely randomly.

Pair Corralation between Hainan Haiyao and China Minmetals

Assuming the 90 days trading horizon Hainan Haiyao Co is expected to under-perform the China Minmetals. In addition to that, Hainan Haiyao is 1.28 times more volatile than China Minmetals Rare. It trades about -0.02 of its total potential returns per unit of risk. China Minmetals Rare is currently generating about 0.06 per unit of volatility. If you would invest  2,909  in China Minmetals Rare on December 24, 2024 and sell it today you would earn a total of  215.00  from holding China Minmetals Rare or generate 7.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Hainan Haiyao Co  vs.  China Minmetals Rare

Hainan Haiyao

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Haiyao Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hainan Haiyao is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Minmetals Rare

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Minmetals Rare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Minmetals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hainan Haiyao and China Minmetals

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

The idea behind Hainan Haiyao Co and China Minmetals Rare 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.