Correlation Between Industrial and Hainan Haiqi

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

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

Diversification Opportunities for Industrial and Hainan Haiqi

-0.6

Correlation Coefficient

Industrial  Hainan Haiqi

Excellent diversification

The 3 months correlation between Industrial and Hainan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Hainan Haiqi Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Haiqi Transpo and Industrial 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 Industrial and Commercial are associated (or correlated) with Hainan Haiqi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Haiqi Transpo has no effect on the direction of Industrial i.e., Industrial and Hainan Haiqi go up and down completely randomly.

Pair Corralation between Industrial and Hainan Haiqi

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.5 times more return on investment than Hainan Haiqi. However, Industrial and Commercial is 2.01 times less risky than Hainan Haiqi. It trades about 0.16 of its potential returns per unit of risk. Hainan Haiqi Transportation is currently generating about -0.12 per unit of risk. If you would invest  613.00  in Industrial and Commercial on December 2, 2024 and sell it today you would earn a total of  74.00  from holding Industrial and Commercial or generate 12.07% return on investment over 90 days.

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

Industrial and Commercial  vs.  Hainan Haiqi Transportation

Industrial and Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Haiqi Transpo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Haiqi Transportation 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial and Hainan Haiqi

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

The idea behind Industrial and Commercial and Hainan Haiqi Transportation 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.