Correlation Between Harbin Hatou and Zhejiang Construction

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

Diversification Opportunities for Harbin Hatou and Zhejiang Construction

0.44

Correlation Coefficient

Harbin Hatou  Zhejiang Construction

Very weak diversification

The 3 months correlation between Harbin and Zhejiang is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Hatou Investment and Zhejiang Construction Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Construction 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 Zhejiang Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Construction has no effect on the direction of Harbin Hatou i.e., Harbin Hatou and Zhejiang Construction go up and down completely randomly.

Pair Corralation between Harbin Hatou and Zhejiang Construction

Assuming the 90 days trading horizon Harbin Hatou Investment is expected to generate 0.93 times more return on investment than Zhejiang Construction. However, Harbin Hatou Investment is 1.08 times less risky than Zhejiang Construction. It trades about 0.03 of its potential returns per unit of risk. Zhejiang Construction Investment is currently generating about -0.04 per unit of risk. If you would invest  495.00  in Harbin Hatou Investment on December 4, 2024 and sell it today you would earn a total of  126.00  from holding Harbin Hatou Investment or generate 25.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Harbin Hatou Investment  vs.  Zhejiang Construction Investme

Harbin Hatou Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harbin Hatou Investment 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zhejiang Construction

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Harbin Hatou Investment and Zhejiang Construction Investment 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.