Correlation Between Ping An and Huatian Hotel

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

By analyzing existing cross correlation between Ping An Insurance and Huatian Hotel Group, you can compare the effects of market volatilities on Ping An and Huatian Hotel 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 Ping An with a short position of Huatian Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Huatian Hotel.

Diversification Opportunities for Ping An and Huatian Hotel

0.1

Correlation Coefficient

Ping An  Huatian Hotel

Average diversification

The 3 months correlation between Ping and Huatian is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Huatian Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huatian Hotel Group and Ping An 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 Ping An Insurance are associated (or correlated) with Huatian Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huatian Hotel Group has no effect on the direction of Ping An i.e., Ping An and Huatian Hotel go up and down completely randomly.

Pair Corralation between Ping An and Huatian Hotel

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 0.44 times more return on investment than Huatian Hotel. However, Ping An Insurance is 2.27 times less risky than Huatian Hotel. It trades about -0.11 of its potential returns per unit of risk. Huatian Hotel Group is currently generating about -0.15 per unit of risk. If you would invest  5,443  in Ping An Insurance on October 4, 2024 and sell it today you would lose (178.00) from holding Ping An Insurance or give up 3.27% of portfolio value over 90 days.

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

Ping An Insurance  vs.  Huatian Hotel Group

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Huatian Hotel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huatian Hotel Group 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 Ping An and Huatian Hotel

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

The idea behind Ping An Insurance and Huatian Hotel 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.