Correlation Between Harbin Air and Xinjiang Goldwind

Can any of the company-specific risk be diversified away by investing in both Harbin Air and Xinjiang Goldwind 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 Xinjiang Goldwind 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 Xinjiang Goldwind Science, you can compare the effects of market volatilities on Harbin Air and Xinjiang Goldwind 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 Xinjiang Goldwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbin Air and Xinjiang Goldwind.

Diversification Opportunities for Harbin Air and Xinjiang Goldwind

-0.11

Correlation Coefficient

Harbin Air  Xinjiang Goldwind

Good diversification

The 3 months correlation between Harbin and Xinjiang is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Air Conditioning and Xinjiang Goldwind Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Goldwind Science 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 Xinjiang Goldwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Goldwind Science has no effect on the direction of Harbin Air i.e., Harbin Air and Xinjiang Goldwind go up and down completely randomly.

Pair Corralation between Harbin Air and Xinjiang Goldwind

Assuming the 90 days trading horizon Harbin Air Conditioning is expected to generate 2.22 times more return on investment than Xinjiang Goldwind. However, Harbin Air is 2.22 times more volatile than Xinjiang Goldwind Science. It trades about 0.13 of its potential returns per unit of risk. Xinjiang Goldwind Science is currently generating about -0.12 per unit of risk. If you would invest  437.00  in Harbin Air Conditioning on December 26, 2024 and sell it today you would earn a total of  114.00  from holding Harbin Air Conditioning or generate 26.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Harbin Air Conditioning  vs.  Xinjiang Goldwind Science

Harbin Air Conditioning

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Air Conditioning are ranked lower than 10 (%) 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.

Xinjiang Goldwind Science

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xinjiang Goldwind Science 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.

Pair Trading with Harbin Air and Xinjiang Goldwind

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

The idea behind Harbin Air Conditioning and Xinjiang Goldwind Science 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.