Correlation Between Harbin Air and Dezhan HealthCare

Can any of the company-specific risk be diversified away by investing in both Harbin Air and Dezhan HealthCare 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 Harbin Air and Dezhan HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Harbin Air Conditioning and Dezhan HealthCare Co, you can compare the effects of market volatilities on Harbin Air and Dezhan HealthCare 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 Harbin Air with a short position of Dezhan HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbin Air and Dezhan HealthCare.

Diversification Opportunities for Harbin Air and Dezhan HealthCare

0.97

Correlation Coefficient

Harbin Air  Dezhan HealthCare

Almost no diversification

The 3 months correlation between Harbin and Dezhan is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Air Conditioning and Dezhan HealthCare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dezhan HealthCare and Harbin Air 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 Harbin Air Conditioning are associated (or correlated) with Dezhan HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dezhan HealthCare has no effect on the direction of Harbin Air i.e., Harbin Air and Dezhan HealthCare go up and down completely randomly.

Pair Corralation between Harbin Air and Dezhan HealthCare

Assuming the 90 days trading horizon Harbin Air Conditioning is expected to generate 0.86 times more return on investment than Dezhan HealthCare. However, Harbin Air Conditioning is 1.17 times less risky than Dezhan HealthCare. It trades about 0.25 of its potential returns per unit of risk. Dezhan HealthCare Co is currently generating about 0.17 per unit of risk. If you would invest  359.00  in Harbin Air Conditioning on September 4, 2024 and sell it today you would earn a total of  155.00  from holding Harbin Air Conditioning or generate 43.18% return on investment over 90 days.

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

Harbin Air Conditioning  vs.  Dezhan HealthCare Co

Harbin Air Conditioning

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Air Conditioning are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harbin Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Dezhan HealthCare

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Harbin Air and Dezhan HealthCare

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

The idea behind Harbin Air Conditioning and Dezhan HealthCare 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.