Correlation Between Hainan HNA and SAIC

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

By analyzing existing cross correlation between Hainan HNA Infrastructure and SAIC Motor Corp, you can compare the effects of market volatilities on Hainan HNA and SAIC 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 Hainan HNA with a short position of SAIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan HNA and SAIC.

Diversification Opportunities for Hainan HNA and SAIC

0.58

Correlation Coefficient

Hainan HNA  SAIC

Very weak diversification

The 3 months correlation between Hainan and SAIC is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hainan HNA Infrastructure and SAIC Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAIC Motor Corp and Hainan HNA 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 Hainan HNA Infrastructure are associated (or correlated) with SAIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAIC Motor Corp has no effect on the direction of Hainan HNA i.e., Hainan HNA and SAIC go up and down completely randomly.

Pair Corralation between Hainan HNA and SAIC

Assuming the 90 days trading horizon Hainan HNA Infrastructure is expected to under-perform the SAIC. But the stock apears to be less risky and, when comparing its historical volatility, Hainan HNA Infrastructure is 1.05 times less risky than SAIC. The stock trades about -0.03 of its potential returns per unit of risk. The SAIC Motor Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,467  in SAIC Motor Corp on October 12, 2024 and sell it today you would earn a total of  296.00  from holding SAIC Motor Corp or generate 20.18% return on investment over 90 days.

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

Hainan HNA Infrastructure  vs.  SAIC Motor Corp

Hainan HNA Infrastructure

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan HNA Infrastructure are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hainan HNA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SAIC Motor Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAIC Motor Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SAIC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan HNA and SAIC

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

The idea behind Hainan HNA Infrastructure and SAIC Motor Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.