Correlation Between Xiamen Bank and Hainan Mining

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Can any of the company-specific risk be diversified away by investing in both Xiamen Bank 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 Xiamen Bank and Hainan Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xiamen Bank Co and Hainan Mining Co, you can compare the effects of market volatilities on Xiamen Bank 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 Xiamen Bank with a short position of Hainan Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen Bank and Hainan Mining.

Diversification Opportunities for Xiamen Bank and Hainan Mining

XiamenHainanDiversified AwayXiamenHainanDiversified Away100%
0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Xiamen and Hainan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Bank Co and Hainan Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Mining and Xiamen Bank 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 Xiamen Bank Co 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 Xiamen Bank i.e., Xiamen Bank and Hainan Mining go up and down completely randomly.

Pair Corralation between Xiamen Bank and Hainan Mining

Assuming the 90 days trading horizon Xiamen Bank is expected to generate 1.31 times less return on investment than Hainan Mining. But when comparing it to its historical volatility, Xiamen Bank Co is 1.42 times less risky than Hainan Mining. It trades about 0.15 of its potential returns per unit of risk. Hainan Mining Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  591.00  in Hainan Mining Co on September 25, 2024 and sell it today you would earn a total of  160.00  from holding Hainan Mining Co or generate 27.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Xiamen Bank Co  vs.  Hainan Mining Co

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0102030
JavaScript chart by amCharts 3.21.15601187 601969
       Timeline  
Xiamen Bank 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Bank Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Bank sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec4.44.64.855.25.45.65.8
Hainan Mining 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Mining Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Mining sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec5.566.577.588.5

Xiamen Bank and Hainan Mining Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.72-5.03-3.35-1.660.01.783.625.467.39.13 0.020.030.040.050.060.070.08
JavaScript chart by amCharts 3.21.15601187 601969
       Returns  

Pair Trading with Xiamen Bank and Hainan Mining

The main advantage of trading using opposite Xiamen Bank and Hainan Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiamen Bank 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 Xiamen Bank Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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