Correlation Between Hainan HNA and Suzhou Douson

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

Diversification Opportunities for Hainan HNA and Suzhou Douson

0.35

Correlation Coefficient

Hainan HNA  Suzhou Douson

Weak diversification

The 3 months correlation between Hainan and Suzhou is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hainan HNA Infrastructure and Suzhou Douson Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Douson Drilling 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 Suzhou Douson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Douson Drilling has no effect on the direction of Hainan HNA i.e., Hainan HNA and Suzhou Douson go up and down completely randomly.

Pair Corralation between Hainan HNA and Suzhou Douson

Assuming the 90 days trading horizon Hainan HNA Infrastructure is expected to under-perform the Suzhou Douson. But the stock apears to be less risky and, when comparing its historical volatility, Hainan HNA Infrastructure is 2.75 times less risky than Suzhou Douson. The stock trades about -0.02 of its potential returns per unit of risk. The Suzhou Douson Drilling is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,525  in Suzhou Douson Drilling on December 26, 2024 and sell it today you would earn a total of  789.00  from holding Suzhou Douson Drilling or generate 31.25% return on investment over 90 days.

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

Hainan HNA Infrastructure  vs.  Suzhou Douson Drilling

Hainan HNA Infrastructure

Risk-Adjusted Performance

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.

Suzhou Douson Drilling

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Douson Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Douson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan HNA and Suzhou Douson

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

The idea behind Hainan HNA Infrastructure and Suzhou Douson Drilling 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 Anywhere module to track or share privately all of your investments from the convenience of any device.