Correlation Between Harbin Hatou and HOB Biotech

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

Diversification Opportunities for Harbin Hatou and HOB Biotech

0.36

Correlation Coefficient

Harbin Hatou  HOB Biotech

Weak diversification

The 3 months correlation between Harbin and HOB is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Hatou Investment and HOB Biotech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOB Biotech Group 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 HOB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOB Biotech Group has no effect on the direction of Harbin Hatou i.e., Harbin Hatou and HOB Biotech go up and down completely randomly.

Pair Corralation between Harbin Hatou and HOB Biotech

Assuming the 90 days trading horizon Harbin Hatou Investment is expected to under-perform the HOB Biotech. In addition to that, Harbin Hatou is 1.07 times more volatile than HOB Biotech Group. It trades about -0.23 of its total potential returns per unit of risk. HOB Biotech Group is currently generating about -0.14 per unit of volatility. If you would invest  9,731  in HOB Biotech Group on October 22, 2024 and sell it today you would lose (826.00) from holding HOB Biotech Group or give up 8.49% of portfolio value over 90 days.

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

Harbin Hatou Investment  vs.  HOB Biotech Group

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.

HOB Biotech Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HOB Biotech Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HOB Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harbin Hatou and HOB Biotech

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

The idea behind Harbin Hatou Investment and HOB Biotech Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.