Correlation Between Kweichow Moutai and Hainan Development

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

By analyzing existing cross correlation between Kweichow Moutai Co and Hainan Development Holdings, you can compare the effects of market volatilities on Kweichow Moutai and Hainan Development 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 Kweichow Moutai with a short position of Hainan Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and Hainan Development.

Diversification Opportunities for Kweichow Moutai and Hainan Development

0.71

Correlation Coefficient

Kweichow Moutai  Hainan Development

Poor diversification

The 3 months correlation between Kweichow and Hainan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Hainan Development Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Development and Kweichow Moutai 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 Kweichow Moutai Co are associated (or correlated) with Hainan Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Development has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Hainan Development go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Hainan Development

Assuming the 90 days trading horizon Kweichow Moutai is expected to generate 1.48 times less return on investment than Hainan Development. But when comparing it to its historical volatility, Kweichow Moutai Co is 2.14 times less risky than Hainan Development. It trades about 0.05 of its potential returns per unit of risk. Hainan Development Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  932.00  in Hainan Development Holdings on December 25, 2024 and sell it today you would earn a total of  32.00  from holding Hainan Development Holdings or generate 3.43% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  Hainan Development Holdings

Kweichow Moutai

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kweichow Moutai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hainan Development

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Development Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Development may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kweichow Moutai and Hainan Development

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

The idea behind Kweichow Moutai Co and Hainan Development Holdings 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.