Correlation Between Hainan Mining and Sichuan Tianqi

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

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

Diversification Opportunities for Hainan Mining and Sichuan Tianqi

0.37

Correlation Coefficient

Hainan Mining  Sichuan Tianqi

Weak diversification

The 3 months correlation between Hainan and Sichuan is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Sichuan Tianqi Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Tianqi Lithium and Hainan 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 Hainan Mining Co are associated (or correlated) with Sichuan Tianqi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Tianqi Lithium has no effect on the direction of Hainan Mining i.e., Hainan Mining and Sichuan Tianqi go up and down completely randomly.

Pair Corralation between Hainan Mining and Sichuan Tianqi

Assuming the 90 days trading horizon Hainan Mining Co is expected to generate 0.82 times more return on investment than Sichuan Tianqi. However, Hainan Mining Co is 1.21 times less risky than Sichuan Tianqi. It trades about 0.02 of its potential returns per unit of risk. Sichuan Tianqi Lithium is currently generating about -0.04 per unit of risk. If you would invest  633.00  in Hainan Mining Co on October 5, 2024 and sell it today you would earn a total of  36.00  from holding Hainan Mining Co or generate 5.69% return on investment over 90 days.

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

Hainan Mining Co  vs.  Sichuan Tianqi Lithium

Hainan Mining

Risk-Adjusted Performance

0 of 100

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.

Sichuan Tianqi Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Tianqi Lithium 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.

Pair Trading with Hainan Mining and Sichuan Tianqi

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

The idea behind Hainan Mining Co and Sichuan Tianqi Lithium 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.