Correlation Between Hainan Mining and Suzhou Mingzhi

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

Diversification Opportunities for Hainan Mining and Suzhou Mingzhi

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Hainan and Suzhou is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Suzhou Mingzhi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Mingzhi Technology 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 Suzhou Mingzhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Mingzhi Technology has no effect on the direction of Hainan Mining i.e., Hainan Mining and Suzhou Mingzhi go up and down completely randomly.

Pair Corralation between Hainan Mining and Suzhou Mingzhi

Assuming the 90 days trading horizon Hainan Mining is expected to generate 1.17 times less return on investment than Suzhou Mingzhi. But when comparing it to its historical volatility, Hainan Mining Co is 1.24 times less risky than Suzhou Mingzhi. It trades about 0.19 of its potential returns per unit of risk. Suzhou Mingzhi Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,319  in Suzhou Mingzhi Technology on September 14, 2024 and sell it today you would earn a total of  601.00  from holding Suzhou Mingzhi Technology or generate 45.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.28%
ValuesDaily Returns

Hainan Mining Co  vs.  Suzhou Mingzhi Technology

 Performance 
       Timeline  
Hainan Mining 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Mining Co are ranked lower than 15 (%) 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.
Suzhou Mingzhi Technology 

Risk-Adjusted Performance

14 of 100

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

Hainan Mining and Suzhou Mingzhi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hainan Mining and Suzhou Mingzhi

The main advantage of trading using opposite Hainan Mining and Suzhou Mingzhi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hainan Mining position performs unexpectedly, Suzhou Mingzhi 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 Suzhou Mingzhi will offset losses from the drop in Suzhou Mingzhi's long position.
The idea behind Hainan Mining Co and Suzhou Mingzhi Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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