Correlation Between Harbin Hatou and Western Securities

Can any of the company-specific risk be diversified away by investing in both Harbin Hatou and Western Securities 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 Western Securities 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 Western Securities Co, you can compare the effects of market volatilities on Harbin Hatou and Western Securities 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 Western Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbin Hatou and Western Securities.

Diversification Opportunities for Harbin Hatou and Western Securities

0.55

Correlation Coefficient

Harbin Hatou  Western Securities

Very weak diversification

The 3 months correlation between Harbin and Western is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Hatou Investment and Western Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Securities 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 Western Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Securities has no effect on the direction of Harbin Hatou i.e., Harbin Hatou and Western Securities go up and down completely randomly.

Pair Corralation between Harbin Hatou and Western Securities

Assuming the 90 days trading horizon Harbin Hatou Investment is expected to under-perform the Western Securities. In addition to that, Harbin Hatou is 1.69 times more volatile than Western Securities Co. It trades about -0.24 of its total potential returns per unit of risk. Western Securities Co is currently generating about -0.2 per unit of volatility. If you would invest  840.00  in Western Securities Co on October 23, 2024 and sell it today you would lose (64.00) from holding Western Securities Co or give up 7.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Harbin Hatou Investment  vs.  Western Securities Co

Harbin Hatou Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Hatou Investment are ranked lower than 3 (%) 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.

Western Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Western Securities 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 Western Securities

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

The idea behind Harbin Hatou Investment and Western Securities Co 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.