Correlation Between Harbin Hatou and DRLimited

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

Diversification Opportunities for Harbin Hatou and DRLimited

-0.27

Correlation Coefficient

Harbin Hatou  DRLimited

Very good diversification

The 3 months correlation between Harbin and DRLimited is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Hatou Investment and DR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Limited 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 DRLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Limited has no effect on the direction of Harbin Hatou i.e., Harbin Hatou and DRLimited go up and down completely randomly.

Pair Corralation between Harbin Hatou and DRLimited

Assuming the 90 days trading horizon Harbin Hatou Investment is expected to under-perform the DRLimited. In addition to that, Harbin Hatou is 1.11 times more volatile than DR Limited. It trades about -0.05 of its total potential returns per unit of risk. DR Limited is currently generating about 0.02 per unit of volatility. If you would invest  2,525  in DR Limited on December 2, 2024 and sell it today you would earn a total of  45.00  from holding DR Limited or generate 1.78% return on investment over 90 days.

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

Harbin Hatou Investment  vs.  DR Limited

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

DR Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DR Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DRLimited 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 DRLimited

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

The idea behind Harbin Hatou Investment and DR Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.