Correlation Between Harbin Hatou and Shenzhen Shenbao

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

By analyzing existing cross correlation between Harbin Hatou Investment and Shenzhen Shenbao Industrial, you can compare the effects of market volatilities on Harbin Hatou and Shenzhen Shenbao 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 Harbin Hatou with a short position of Shenzhen Shenbao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbin Hatou and Shenzhen Shenbao.

Diversification Opportunities for Harbin Hatou and Shenzhen Shenbao

0.62

Correlation Coefficient

Harbin Hatou  Shenzhen Shenbao

Poor diversification

The 3 months correlation between Harbin and Shenzhen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Hatou Investment and Shenzhen Shenbao Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Shenbao Ind and Harbin Hatou 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 Harbin Hatou Investment are associated (or correlated) with Shenzhen Shenbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Shenbao Ind has no effect on the direction of Harbin Hatou i.e., Harbin Hatou and Shenzhen Shenbao go up and down completely randomly.

Pair Corralation between Harbin Hatou and Shenzhen Shenbao

Assuming the 90 days trading horizon Harbin Hatou Investment is expected to generate 1.99 times more return on investment than Shenzhen Shenbao. However, Harbin Hatou is 1.99 times more volatile than Shenzhen Shenbao Industrial. It trades about 0.04 of its potential returns per unit of risk. Shenzhen Shenbao Industrial is currently generating about -0.02 per unit of risk. If you would invest  609.00  in Harbin Hatou Investment on October 10, 2024 and sell it today you would earn a total of  29.00  from holding Harbin Hatou Investment or generate 4.76% return on investment over 90 days.

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

Harbin Hatou Investment  vs.  Shenzhen Shenbao Industrial

Harbin Hatou Investment

Risk-Adjusted Performance

2 of 100

Weak

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

Shenzhen Shenbao Ind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Harbin Hatou and Shenzhen Shenbao

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

The idea behind Harbin Hatou Investment and Shenzhen Shenbao Industrial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.