Correlation Between HaiXin Foods and Hainan Development

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

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

Diversification Opportunities for HaiXin Foods and Hainan Development

0.68

Correlation Coefficient

HaiXin Foods  Hainan Development

Poor diversification

The 3 months correlation between HaiXin and Hainan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding HaiXin Foods Co and Hainan Development Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Development and HaiXin Foods 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 HaiXin Foods Co are associated (or correlated) with Hainan Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Development has no effect on the direction of HaiXin Foods i.e., HaiXin Foods and Hainan Development go up and down completely randomly.

Pair Corralation between HaiXin Foods and Hainan Development

Assuming the 90 days trading horizon HaiXin Foods Co is expected to under-perform the Hainan Development. But the stock apears to be less risky and, when comparing its historical volatility, HaiXin Foods Co is 1.03 times less risky than Hainan Development. The stock trades about -0.04 of its potential returns per unit of risk. The Hainan Development Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  932.00  in Hainan Development Holdings on December 25, 2024 and sell it today you would earn a total of  32.00  from holding Hainan Development Holdings or generate 3.43% return on investment over 90 days.

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

HaiXin Foods Co  vs.  Hainan Development Holdings

HaiXin Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days HaiXin Foods Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hainan Development

Risk-Adjusted Performance

Weak

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

Pair Trading with HaiXin Foods and Hainan Development

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

The idea behind HaiXin Foods Co and Hainan Development Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.