Correlation Between China Enterprise and Harbin Air

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

By analyzing existing cross correlation between China Enterprise Co and Harbin Air Conditioning, you can compare the effects of market volatilities on China Enterprise and Harbin Air 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 China Enterprise with a short position of Harbin Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Enterprise and Harbin Air.

Diversification Opportunities for China Enterprise and Harbin Air

0.61

Correlation Coefficient

China Enterprise  Harbin Air

Poor diversification

The 3 months correlation between China and Harbin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding China Enterprise Co and Harbin Air Conditioning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbin Air Conditioning and China Enterprise 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 China Enterprise Co are associated (or correlated) with Harbin Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbin Air Conditioning has no effect on the direction of China Enterprise i.e., China Enterprise and Harbin Air go up and down completely randomly.

Pair Corralation between China Enterprise and Harbin Air

Assuming the 90 days trading horizon China Enterprise Co is expected to under-perform the Harbin Air. But the stock apears to be less risky and, when comparing its historical volatility, China Enterprise Co is 1.08 times less risky than Harbin Air. The stock trades about -0.14 of its potential returns per unit of risk. The Harbin Air Conditioning is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  476.00  in Harbin Air Conditioning on October 6, 2024 and sell it today you would lose (46.00) from holding Harbin Air Conditioning or give up 9.66% of portfolio value over 90 days.

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

China Enterprise Co  vs.  Harbin Air Conditioning

China Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Harbin Air Conditioning

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Enterprise and Harbin Air

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

The idea behind China Enterprise Co and Harbin Air Conditioning 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.