Correlation Between Hainan Mining and Jinling Hotel

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

Diversification Opportunities for Hainan Mining and Jinling Hotel

0.88

Correlation Coefficient

Hainan Mining  Jinling Hotel

Very poor diversification

The 3 months correlation between Hainan and Jinling is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Jinling Hotel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinling Hotel Corp 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 Jinling Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinling Hotel Corp has no effect on the direction of Hainan Mining i.e., Hainan Mining and Jinling Hotel go up and down completely randomly.

Pair Corralation between Hainan Mining and Jinling Hotel

Assuming the 90 days trading horizon Hainan Mining Co is expected to generate 1.28 times more return on investment than Jinling Hotel. However, Hainan Mining is 1.28 times more volatile than Jinling Hotel Corp. It trades about 0.19 of its potential returns per unit of risk. Jinling Hotel Corp is currently generating about 0.14 per unit of risk. If you would invest  711.00  in Hainan Mining Co on September 20, 2024 and sell it today you would earn a total of  88.00  from holding Hainan Mining Co or generate 12.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Hainan Mining Co  vs.  Jinling Hotel Corp

Hainan Mining

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Mining Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Jinling Hotel Corp

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Hainan Mining and Jinling Hotel

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

The idea behind Hainan Mining Co and Jinling Hotel Corp 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.