Correlation Between Jiugui Liquor and Hainan Haiqi

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

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

Diversification Opportunities for Jiugui Liquor and Hainan Haiqi

0.81

Correlation Coefficient

Jiugui Liquor  Hainan Haiqi

Very poor diversification

The 3 months correlation between Jiugui and Hainan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Hainan Haiqi Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Haiqi Transpo and Jiugui Liquor 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 Jiugui Liquor Co are associated (or correlated) with Hainan Haiqi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Haiqi Transpo has no effect on the direction of Jiugui Liquor i.e., Jiugui Liquor and Hainan Haiqi go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Hainan Haiqi

Assuming the 90 days trading horizon Jiugui Liquor is expected to generate 4.65 times less return on investment than Hainan Haiqi. But when comparing it to its historical volatility, Jiugui Liquor Co is 1.06 times less risky than Hainan Haiqi. It trades about 0.01 of its potential returns per unit of risk. Hainan Haiqi Transportation is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,829  in Hainan Haiqi Transportation on October 1, 2024 and sell it today you would earn a total of  68.00  from holding Hainan Haiqi Transportation or generate 3.72% return on investment over 90 days.

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

Jiugui Liquor Co  vs.  Hainan Haiqi Transportation

Jiugui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hainan Haiqi Transpo

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Haiqi Transportation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Haiqi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jiugui Liquor and Hainan Haiqi

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

The idea behind Jiugui Liquor Co and Hainan Haiqi Transportation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.