Correlation Between Huaibei Mining and Hainan Mining

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

By analyzing existing cross correlation between Huaibei Mining Holdings and Hainan Mining Co, you can compare the effects of market volatilities on Huaibei Mining and Hainan Mining 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 Huaibei Mining with a short position of Hainan Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaibei Mining and Hainan Mining.

Diversification Opportunities for Huaibei Mining and Hainan Mining

0.63

Correlation Coefficient

Huaibei Mining  Hainan Mining

Poor diversification

The 3 months correlation between Huaibei and Hainan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Huaibei Mining Holdings and Hainan Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Mining and Huaibei Mining 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 Huaibei Mining Holdings are associated (or correlated) with Hainan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Mining has no effect on the direction of Huaibei Mining i.e., Huaibei Mining and Hainan Mining go up and down completely randomly.

Pair Corralation between Huaibei Mining and Hainan Mining

Assuming the 90 days trading horizon Huaibei Mining Holdings is expected to generate 0.69 times more return on investment than Hainan Mining. However, Huaibei Mining Holdings is 1.45 times less risky than Hainan Mining. It trades about -0.08 of its potential returns per unit of risk. Hainan Mining Co is currently generating about -0.09 per unit of risk. If you would invest  1,448  in Huaibei Mining Holdings on December 2, 2024 and sell it today you would lose (96.00) from holding Huaibei Mining Holdings or give up 6.63% of portfolio value over 90 days.

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

Huaibei Mining Holdings  vs.  Hainan Mining Co

Huaibei Mining Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huaibei Mining Holdings 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.

Hainan Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Mining Co 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.

Pair Trading with Huaibei Mining and Hainan Mining

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

The idea behind Huaibei Mining Holdings and Hainan Mining 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.