Correlation Between Runjian Communication and Hainan Haiyao

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

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

Diversification Opportunities for Runjian Communication and Hainan Haiyao

0.31

Correlation Coefficient

Runjian Communication  Hainan Haiyao

Weak diversification

The 3 months correlation between Runjian and Hainan is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Runjian Communication Co and Hainan Haiyao Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Haiyao and Runjian Communication 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 Runjian Communication Co are associated (or correlated) with Hainan Haiyao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Haiyao has no effect on the direction of Runjian Communication i.e., Runjian Communication and Hainan Haiyao go up and down completely randomly.

Pair Corralation between Runjian Communication and Hainan Haiyao

Assuming the 90 days trading horizon Runjian Communication Co is expected to generate 1.66 times more return on investment than Hainan Haiyao. However, Runjian Communication is 1.66 times more volatile than Hainan Haiyao Co. It trades about 0.17 of its potential returns per unit of risk. Hainan Haiyao Co is currently generating about -0.02 per unit of risk. If you would invest  3,488  in Runjian Communication Co on December 26, 2024 and sell it today you would earn a total of  1,767  from holding Runjian Communication Co or generate 50.66% return on investment over 90 days.

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

Runjian Communication Co  vs.  Hainan Haiyao Co

Runjian Communication

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Runjian Communication Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Runjian Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Haiyao

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Runjian Communication and Hainan Haiyao

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

The idea behind Runjian Communication Co and Hainan Haiyao 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.