Correlation Between Shenzhen Kexin and Haima Automobile

Can any of the company-specific risk be diversified away by investing in both Shenzhen Kexin and Haima Automobile 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 Shenzhen Kexin and Haima Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Kexin Communication and Haima Automobile Group, you can compare the effects of market volatilities on Shenzhen Kexin and Haima Automobile 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 Shenzhen Kexin with a short position of Haima Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Kexin and Haima Automobile.

Diversification Opportunities for Shenzhen Kexin and Haima Automobile

0.7

Correlation Coefficient

Shenzhen Kexin  Haima Automobile

Poor diversification

The 3 months correlation between Shenzhen and Haima is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Kexin Communication and Haima Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haima Automobile and Shenzhen Kexin 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 Shenzhen Kexin Communication are associated (or correlated) with Haima Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haima Automobile has no effect on the direction of Shenzhen Kexin i.e., Shenzhen Kexin and Haima Automobile go up and down completely randomly.

Pair Corralation between Shenzhen Kexin and Haima Automobile

Assuming the 90 days trading horizon Shenzhen Kexin is expected to generate 1.34 times less return on investment than Haima Automobile. But when comparing it to its historical volatility, Shenzhen Kexin Communication is 1.04 times less risky than Haima Automobile. It trades about 0.11 of its potential returns per unit of risk. Haima Automobile Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  319.00  in Haima Automobile Group on September 25, 2024 and sell it today you would earn a total of  122.00  from holding Haima Automobile Group or generate 38.24% return on investment over 90 days.

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

Shenzhen Kexin Communication  vs.  Haima Automobile Group

Shenzhen Kexin Commu

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Kexin Communication are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Kexin sustained solid returns over the last few months and may actually be approaching a breakup point.

Haima Automobile

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haima Automobile Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Haima Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Kexin and Haima Automobile

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

The idea behind Shenzhen Kexin Communication and Haima Automobile Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.