Correlation Between Hainan HNA and Anhui Transport

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

Diversification Opportunities for Hainan HNA and Anhui Transport

0.75

Correlation Coefficient

Hainan HNA  Anhui Transport

Poor diversification

The 3 months correlation between Hainan and Anhui is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hainan HNA Infrastructure and Anhui Transport Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Transport Cons 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 Anhui Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Transport Cons has no effect on the direction of Hainan HNA i.e., Hainan HNA and Anhui Transport go up and down completely randomly.

Pair Corralation between Hainan HNA and Anhui Transport

Assuming the 90 days trading horizon Hainan HNA Infrastructure is expected to under-perform the Anhui Transport. But the stock apears to be less risky and, when comparing its historical volatility, Hainan HNA Infrastructure is 1.48 times less risky than Anhui Transport. The stock trades about -0.02 of its potential returns per unit of risk. The Anhui Transport Consulting is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  732.00  in Anhui Transport Consulting on October 4, 2024 and sell it today you would earn a total of  174.00  from holding Anhui Transport Consulting or generate 23.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Hainan HNA Infrastructure  vs.  Anhui Transport Consulting

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.

Anhui Transport Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Transport Consulting 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 Hainan HNA and Anhui Transport

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

The idea behind Hainan HNA Infrastructure and Anhui Transport Consulting 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.