Correlation Between Hainan Mining and Xizi Clean

Can any of the company-specific risk be diversified away by investing in both Hainan Mining and Xizi Clean 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 Xizi Clean 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 Xizi Clean Energy, you can compare the effects of market volatilities on Hainan Mining and Xizi Clean 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 Xizi Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Mining and Xizi Clean.

Diversification Opportunities for Hainan Mining and Xizi Clean

-0.12

Correlation Coefficient

Hainan Mining  Xizi Clean

Good diversification

The 3 months correlation between Hainan and Xizi is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Xizi Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xizi Clean Energy 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 Xizi Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xizi Clean Energy has no effect on the direction of Hainan Mining i.e., Hainan Mining and Xizi Clean go up and down completely randomly.

Pair Corralation between Hainan Mining and Xizi Clean

Assuming the 90 days trading horizon Hainan Mining is expected to generate 9.49 times less return on investment than Xizi Clean. But when comparing it to its historical volatility, Hainan Mining Co is 1.52 times less risky than Xizi Clean. It trades about 0.02 of its potential returns per unit of risk. Xizi Clean Energy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,127  in Xizi Clean Energy on December 25, 2024 and sell it today you would earn a total of  207.00  from holding Xizi Clean Energy or generate 18.37% return on investment over 90 days.

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

Hainan Mining Co  vs.  Xizi Clean Energy

Hainan Mining

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Mining Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hainan Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xizi Clean Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xizi Clean Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xizi Clean sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Mining and Xizi Clean

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

The idea behind Hainan Mining Co and Xizi Clean Energy 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.