Correlation Between Haima Automobile and China Enterprise

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

Diversification Opportunities for Haima Automobile and China Enterprise

0.53

Correlation Coefficient

Haima Automobile  China Enterprise

Very weak diversification

The 3 months correlation between Haima and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Haima Automobile Group and China Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Enterprise 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 China Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Enterprise has no effect on the direction of Haima Automobile i.e., Haima Automobile and China Enterprise go up and down completely randomly.

Pair Corralation between Haima Automobile and China Enterprise

Assuming the 90 days trading horizon Haima Automobile Group is expected to generate 1.65 times more return on investment than China Enterprise. However, Haima Automobile is 1.65 times more volatile than China Enterprise Co. It trades about 0.07 of its potential returns per unit of risk. China Enterprise Co is currently generating about -0.03 per unit of risk. If you would invest  346.00  in Haima Automobile Group on October 10, 2024 and sell it today you would earn a total of  56.00  from holding Haima Automobile Group or generate 16.18% return on investment over 90 days.

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

Haima Automobile Group  vs.  China Enterprise Co

Haima Automobile

Risk-Adjusted Performance

5 of 100

Modest

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.

China Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Enterprise 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 China Enterprise

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

The idea behind Haima Automobile Group and China Enterprise Co 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.