Correlation Between China Publishing and Haima Automobile

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

By analyzing existing cross correlation between China Publishing Media and Haima Automobile Group, you can compare the effects of market volatilities on China Publishing and Haima Automobile 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 China Publishing with a short position of Haima Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Publishing and Haima Automobile.

Diversification Opportunities for China Publishing and Haima Automobile

0.86

Correlation Coefficient

China Publishing  Haima Automobile

Very poor diversification

The 3 months correlation between China and Haima is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding China Publishing Media and Haima Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haima Automobile and China Publishing 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 China Publishing Media are associated (or correlated) with Haima Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haima Automobile has no effect on the direction of China Publishing i.e., China Publishing and Haima Automobile go up and down completely randomly.

Pair Corralation between China Publishing and Haima Automobile

Assuming the 90 days trading horizon China Publishing Media is expected to under-perform the Haima Automobile. But the stock apears to be less risky and, when comparing its historical volatility, China Publishing Media is 1.32 times less risky than Haima Automobile. The stock trades about -0.12 of its potential returns per unit of risk. The Haima Automobile Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  444.00  in Haima Automobile Group on December 24, 2024 and sell it today you would lose (22.00) from holding Haima Automobile Group or give up 4.95% of portfolio value over 90 days.

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

China Publishing Media  vs.  Haima Automobile Group

China Publishing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Publishing Media 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.

Haima Automobile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Haima Automobile Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Haima Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Publishing and Haima Automobile

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

The idea behind China Publishing Media and Haima Automobile 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.