Correlation Between Hainan Mining and Liaoning Dingjide

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

Diversification Opportunities for Hainan Mining and Liaoning Dingjide

0.37

Correlation Coefficient

Hainan Mining  Liaoning Dingjide

Weak diversification

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

Pair Corralation between Hainan Mining and Liaoning Dingjide

Assuming the 90 days trading horizon Hainan Mining is expected to generate 2.3 times less return on investment than Liaoning Dingjide. But when comparing it to its historical volatility, Hainan Mining Co is 1.68 times less risky than Liaoning Dingjide. It trades about 0.02 of its potential returns per unit of risk. Liaoning Dingjide Petrochemical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,114  in Liaoning Dingjide Petrochemical on December 25, 2024 and sell it today you would earn a total of  76.00  from holding Liaoning Dingjide Petrochemical or generate 2.44% 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.  Liaoning Dingjide Petrochemica

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.

Liaoning Dingjide

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Dingjide Petrochemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Liaoning Dingjide is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hainan Mining and Liaoning Dingjide

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

The idea behind Hainan Mining Co and Liaoning Dingjide Petrochemical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.