Correlation Between Hainan Mining and Sinocat Environmental

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

Diversification Opportunities for Hainan Mining and Sinocat Environmental

0.71

Correlation Coefficient

Hainan Mining  Sinocat Environmental

Poor diversification

The 3 months correlation between Hainan and Sinocat is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Sinocat Environmental Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinocat Environmental 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 Sinocat Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinocat Environmental has no effect on the direction of Hainan Mining i.e., Hainan Mining and Sinocat Environmental go up and down completely randomly.

Pair Corralation between Hainan Mining and Sinocat Environmental

Assuming the 90 days trading horizon Hainan Mining Co is expected to generate 0.68 times more return on investment than Sinocat Environmental. However, Hainan Mining Co is 1.47 times less risky than Sinocat Environmental. It trades about 0.0 of its potential returns per unit of risk. Sinocat Environmental Technology is currently generating about -0.02 per unit of risk. If you would invest  786.00  in Hainan Mining Co on October 25, 2024 and sell it today you would lose (108.00) from holding Hainan Mining Co or give up 13.74% of portfolio value over 90 days.

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

Hainan Mining Co  vs.  Sinocat Environmental Technolo

Hainan Mining

Risk-Adjusted Performance

0 of 100

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.

Sinocat Environmental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocat Environmental Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinocat Environmental 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 Sinocat Environmental

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

The idea behind Hainan Mining Co and Sinocat Environmental 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.