Correlation Between Long Yuan and Harbin Air

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

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

Diversification Opportunities for Long Yuan and Harbin Air

0.5

Correlation Coefficient

Long Yuan  Harbin Air

Very weak diversification

The 3 months correlation between Long and Harbin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Long Yuan Construction and Harbin Air Conditioning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbin Air Conditioning and Long Yuan 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 Long Yuan Construction are associated (or correlated) with Harbin Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbin Air Conditioning has no effect on the direction of Long Yuan i.e., Long Yuan and Harbin Air go up and down completely randomly.

Pair Corralation between Long Yuan and Harbin Air

Assuming the 90 days trading horizon Long Yuan Construction is expected to generate 0.65 times more return on investment than Harbin Air. However, Long Yuan Construction is 1.54 times less risky than Harbin Air. It trades about 0.0 of its potential returns per unit of risk. Harbin Air Conditioning is currently generating about -0.01 per unit of risk. If you would invest  414.00  in Long Yuan Construction on December 2, 2024 and sell it today you would lose (10.00) from holding Long Yuan Construction or give up 2.42% of portfolio value over 90 days.

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

Long Yuan Construction  vs.  Harbin Air Conditioning

Long Yuan Construction

Risk-Adjusted Performance

Very Weak

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

Harbin Air Conditioning

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Long Yuan and Harbin Air

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

The idea behind Long Yuan Construction and Harbin Air Conditioning 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 CEOs Directory module to screen CEOs from public companies around the world.