Correlation Between Sichuan Yahua and Hainan Mining

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

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

Diversification Opportunities for Sichuan Yahua and Hainan Mining

0.85

Correlation Coefficient

Sichuan Yahua  Hainan Mining

Very poor diversification

The 3 months correlation between Sichuan and Hainan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Yahua Industrial and Hainan Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Mining and Sichuan Yahua 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 Sichuan Yahua Industrial are associated (or correlated) with Hainan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Mining has no effect on the direction of Sichuan Yahua i.e., Sichuan Yahua and Hainan Mining go up and down completely randomly.

Pair Corralation between Sichuan Yahua and Hainan Mining

Assuming the 90 days trading horizon Sichuan Yahua Industrial is expected to under-perform the Hainan Mining. In addition to that, Sichuan Yahua is 1.1 times more volatile than Hainan Mining Co. It trades about -0.05 of its total potential returns per unit of risk. Hainan Mining Co is currently generating about 0.01 per unit of volatility. If you would invest  712.00  in Hainan Mining Co on October 4, 2024 and sell it today you would lose (3.00) from holding Hainan Mining Co or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Sichuan Yahua Industrial  vs.  Hainan Mining Co

Sichuan Yahua Industrial

Risk-Adjusted Performance

0 of 100

Weak

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

Hainan Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sichuan Yahua and Hainan Mining

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

The idea behind Sichuan Yahua Industrial and Hainan Mining 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.