Correlation Between Haima Automobile and Shenzhen Bioeasy

Can any of the company-specific risk be diversified away by investing in both Haima Automobile and Shenzhen Bioeasy 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 Bioeasy 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 Bioeasy Biotechnology, you can compare the effects of market volatilities on Haima Automobile and Shenzhen Bioeasy 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 Bioeasy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haima Automobile and Shenzhen Bioeasy.

Diversification Opportunities for Haima Automobile and Shenzhen Bioeasy

0.51

Correlation Coefficient

Haima Automobile  Shenzhen Bioeasy

Very weak diversification

The 3 months correlation between Haima and Shenzhen is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Haima Automobile Group and Shenzhen Bioeasy Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Bioeasy Bio 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 Bioeasy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Bioeasy Bio has no effect on the direction of Haima Automobile i.e., Haima Automobile and Shenzhen Bioeasy go up and down completely randomly.

Pair Corralation between Haima Automobile and Shenzhen Bioeasy

Assuming the 90 days trading horizon Haima Automobile Group is expected to generate 0.89 times more return on investment than Shenzhen Bioeasy. However, Haima Automobile Group is 1.12 times less risky than Shenzhen Bioeasy. It trades about -0.36 of its potential returns per unit of risk. Shenzhen Bioeasy Biotechnology is currently generating about -0.33 per unit of risk. If you would invest  484.00  in Haima Automobile Group on October 9, 2024 and sell it today you would lose (93.00) from holding Haima Automobile Group or give up 19.21% of portfolio value over 90 days.

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

Haima Automobile Group  vs.  Shenzhen Bioeasy Biotechnology

Haima Automobile

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Haima Automobile Group are ranked lower than 5 (%) 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 Bioeasy Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bioeasy Biotechnology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen Bioeasy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Haima Automobile and Shenzhen Bioeasy

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

The idea behind Haima Automobile Group and Shenzhen Bioeasy Biotechnology 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.