Correlation Between Hainan HNA and Flat Glass

Can any of the company-specific risk be diversified away by investing in both Hainan HNA and Flat Glass 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 Flat Glass 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 Flat Glass Group, you can compare the effects of market volatilities on Hainan HNA and Flat Glass 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 Flat Glass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan HNA and Flat Glass.

Diversification Opportunities for Hainan HNA and Flat Glass

0.4

Correlation Coefficient

Hainan HNA  Flat Glass

Very weak diversification

The 3 months correlation between Hainan and Flat is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hainan HNA Infrastructure and Flat Glass Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flat Glass Group 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 Flat Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flat Glass Group has no effect on the direction of Hainan HNA i.e., Hainan HNA and Flat Glass go up and down completely randomly.

Pair Corralation between Hainan HNA and Flat Glass

Assuming the 90 days trading horizon Hainan HNA Infrastructure is expected to generate 0.72 times more return on investment than Flat Glass. However, Hainan HNA Infrastructure is 1.4 times less risky than Flat Glass. It trades about 0.01 of its potential returns per unit of risk. Flat Glass Group is currently generating about -0.01 per unit of risk. If you would invest  347.00  in Hainan HNA Infrastructure on October 13, 2024 and sell it today you would lose (2.00) from holding Hainan HNA Infrastructure or give up 0.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Hainan HNA Infrastructure  vs.  Flat Glass Group

Hainan HNA Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hainan HNA Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Flat Glass Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hainan HNA and Flat Glass

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

The idea behind Hainan HNA Infrastructure and Flat Glass Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.