Correlation Between Chengdu Xingrong and Harbin Hatou

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Can any of the company-specific risk be diversified away by investing in both Chengdu Xingrong and Harbin Hatou 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 Chengdu Xingrong and Harbin Hatou into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chengdu Xingrong Investment and Harbin Hatou Investment, you can compare the effects of market volatilities on Chengdu Xingrong and Harbin Hatou 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 Chengdu Xingrong with a short position of Harbin Hatou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Xingrong and Harbin Hatou.

Diversification Opportunities for Chengdu Xingrong and Harbin Hatou

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Chengdu and Harbin is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Xingrong Investment and Harbin Hatou Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbin Hatou Investment and Chengdu Xingrong 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 Chengdu Xingrong Investment are associated (or correlated) with Harbin Hatou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbin Hatou Investment has no effect on the direction of Chengdu Xingrong i.e., Chengdu Xingrong and Harbin Hatou go up and down completely randomly.

Pair Corralation between Chengdu Xingrong and Harbin Hatou

Assuming the 90 days trading horizon Chengdu Xingrong Investment is expected to generate 0.7 times more return on investment than Harbin Hatou. However, Chengdu Xingrong Investment is 1.43 times less risky than Harbin Hatou. It trades about 0.06 of its potential returns per unit of risk. Harbin Hatou Investment is currently generating about 0.02 per unit of risk. If you would invest  578.00  in Chengdu Xingrong Investment on October 7, 2024 and sell it today you would earn a total of  152.00  from holding Chengdu Xingrong Investment or generate 26.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Chengdu Xingrong Investment  vs.  Harbin Hatou Investment

 Performance 
       Timeline  
Chengdu Xingrong Inv 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Chengdu Xingrong and Harbin Hatou Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chengdu Xingrong and Harbin Hatou

The main advantage of trading using opposite Chengdu Xingrong and Harbin Hatou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chengdu Xingrong position performs unexpectedly, Harbin Hatou 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 Harbin Hatou will offset losses from the drop in Harbin Hatou's long position.
The idea behind Chengdu Xingrong Investment and Harbin Hatou Investment 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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