Correlation Between Hainan Expressway and Dawning Information

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

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

Diversification Opportunities for Hainan Expressway and Dawning Information

0.66

Correlation Coefficient

Hainan Expressway  Dawning Information

Poor diversification

The 3 months correlation between Hainan and Dawning is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Expressway Co and Dawning Information Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawning Information and Hainan Expressway 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 Hainan Expressway Co are associated (or correlated) with Dawning Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawning Information has no effect on the direction of Hainan Expressway i.e., Hainan Expressway and Dawning Information go up and down completely randomly.

Pair Corralation between Hainan Expressway and Dawning Information

Assuming the 90 days trading horizon Hainan Expressway Co is expected to generate 1.01 times more return on investment than Dawning Information. However, Hainan Expressway is 1.01 times more volatile than Dawning Information Industry. It trades about 0.09 of its potential returns per unit of risk. Dawning Information Industry is currently generating about 0.09 per unit of risk. If you would invest  513.00  in Hainan Expressway Co on October 23, 2024 and sell it today you would earn a total of  106.00  from holding Hainan Expressway Co or generate 20.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Hainan Expressway Co  vs.  Dawning Information Industry

Hainan Expressway

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Expressway Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Expressway sustained solid returns over the last few months and may actually be approaching a breakup point.

Dawning Information

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dawning Information Industry are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dawning Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Expressway and Dawning Information

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

The idea behind Hainan Expressway Co and Dawning Information Industry 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.