Correlation Between Zhejiang Construction and Hainan Haiqi

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

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

Diversification Opportunities for Zhejiang Construction and Hainan Haiqi

0.73

Correlation Coefficient

Zhejiang Construction  Hainan Haiqi

Poor diversification

The 3 months correlation between Zhejiang and Hainan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Construction Investme 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 Zhejiang Construction 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 Zhejiang Construction Investment 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 Zhejiang Construction i.e., Zhejiang Construction and Hainan Haiqi go up and down completely randomly.

Pair Corralation between Zhejiang Construction and Hainan Haiqi

Assuming the 90 days trading horizon Zhejiang Construction Investment is expected to generate 0.95 times more return on investment than Hainan Haiqi. However, Zhejiang Construction Investment is 1.06 times less risky than Hainan Haiqi. It trades about -0.04 of its potential returns per unit of risk. Hainan Haiqi Transportation is currently generating about -0.12 per unit of risk. If you would invest  1,019  in Zhejiang Construction Investment on December 1, 2024 and sell it today you would lose (76.00) from holding Zhejiang Construction Investment or give up 7.46% of portfolio value over 90 days.

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

Zhejiang Construction Investme  vs.  Hainan Haiqi Transportation

Zhejiang Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhejiang Construction Investment 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 Haiqi Transpo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Haiqi Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhejiang Construction and Hainan Haiqi

The main advantage of trading using opposite Zhejiang Construction and Hainan Haiqi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang Construction 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 Zhejiang Construction Investment 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.