Correlation Between Haima Automobile and Shenzhen Kexin

Can any of the company-specific risk be diversified away by investing in both Haima Automobile and Shenzhen Kexin 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 Haima Automobile and Shenzhen Kexin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haima Automobile Group and Shenzhen Kexin Communication, you can compare the effects of market volatilities on Haima Automobile and Shenzhen Kexin 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 Haima Automobile with a short position of Shenzhen Kexin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haima Automobile and Shenzhen Kexin.

Diversification Opportunities for Haima Automobile and Shenzhen Kexin

0.7

Correlation Coefficient

Haima Automobile  Shenzhen Kexin

Poor diversification

The 3 months correlation between Haima and Shenzhen is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Haima Automobile Group and Shenzhen Kexin Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Kexin Commu and Haima Automobile 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 Haima Automobile Group are associated (or correlated) with Shenzhen Kexin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Kexin Commu has no effect on the direction of Haima Automobile i.e., Haima Automobile and Shenzhen Kexin go up and down completely randomly.

Pair Corralation between Haima Automobile and Shenzhen Kexin

Assuming the 90 days trading horizon Haima Automobile Group is expected to generate 0.98 times more return on investment than Shenzhen Kexin. However, Haima Automobile Group is 1.02 times less risky than Shenzhen Kexin. It trades about 0.01 of its potential returns per unit of risk. Shenzhen Kexin Communication is currently generating about 0.01 per unit of risk. If you would invest  488.00  in Haima Automobile Group on September 25, 2024 and sell it today you would lose (47.00) from holding Haima Automobile Group or give up 9.63% of portfolio value over 90 days.

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

Haima Automobile Group  vs.  Shenzhen Kexin Communication

Haima Automobile

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haima Automobile Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Haima Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Kexin Commu

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Kexin Communication are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Kexin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haima Automobile and Shenzhen Kexin

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

The idea behind Haima Automobile Group and Shenzhen Kexin Communication 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.