Correlation Between Hainan Mining and Shanghai Yuyuan

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

Diversification Opportunities for Hainan Mining and Shanghai Yuyuan

0.39

Correlation Coefficient

Hainan Mining  Shanghai Yuyuan

Weak diversification

The 3 months correlation between Hainan and Shanghai is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Shanghai Yuyuan Tourist in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yuyuan Tourist 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 Shanghai Yuyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yuyuan Tourist has no effect on the direction of Hainan Mining i.e., Hainan Mining and Shanghai Yuyuan go up and down completely randomly.

Pair Corralation between Hainan Mining and Shanghai Yuyuan

Assuming the 90 days trading horizon Hainan Mining Co is expected to generate 1.14 times more return on investment than Shanghai Yuyuan. However, Hainan Mining is 1.14 times more volatile than Shanghai Yuyuan Tourist. It trades about -0.01 of its potential returns per unit of risk. Shanghai Yuyuan Tourist is currently generating about -0.15 per unit of risk. If you would invest  726.00  in Hainan Mining Co on December 30, 2024 and sell it today you would lose (15.00) from holding Hainan Mining Co or give up 2.07% of portfolio value over 90 days.

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

Hainan Mining Co  vs.  Shanghai Yuyuan Tourist

Hainan Mining

Risk-Adjusted Performance

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 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.

Shanghai Yuyuan Tourist

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Yuyuan Tourist 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 Hainan Mining and Shanghai Yuyuan

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

The idea behind Hainan Mining Co and Shanghai Yuyuan Tourist 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.