Correlation Between Harbin Air and Shenzhen MTC

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

Diversification Opportunities for Harbin Air and Shenzhen MTC

0.02

Correlation Coefficient

Harbin Air  Shenzhen MTC

Significant diversification

The 3 months correlation between Harbin and Shenzhen is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Air Conditioning and Shenzhen MTC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen MTC 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 Shenzhen MTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen MTC has no effect on the direction of Harbin Air i.e., Harbin Air and Shenzhen MTC go up and down completely randomly.

Pair Corralation between Harbin Air and Shenzhen MTC

Assuming the 90 days trading horizon Harbin Air Conditioning is expected to under-perform the Shenzhen MTC. In addition to that, Harbin Air is 1.05 times more volatile than Shenzhen MTC Co. It trades about -0.01 of its total potential returns per unit of risk. Shenzhen MTC Co is currently generating about 0.03 per unit of volatility. If you would invest  475.00  in Shenzhen MTC Co on October 9, 2024 and sell it today you would earn a total of  53.00  from holding Shenzhen MTC Co or generate 11.16% return on investment over 90 days.

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

Harbin Air Conditioning  vs.  Shenzhen MTC Co

Harbin Air Conditioning

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Air Conditioning are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harbin Air may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shenzhen MTC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Harbin Air and Shenzhen MTC

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

The idea behind Harbin Air Conditioning and Shenzhen MTC 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .