Correlation Between Hefei Metalforming and Hainan Haiyao

Can any of the company-specific risk be diversified away by investing in both Hefei Metalforming and Hainan Haiyao 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 Hefei Metalforming and Hainan Haiyao into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hefei Metalforming Mach and Hainan Haiyao Co, you can compare the effects of market volatilities on Hefei Metalforming and Hainan Haiyao 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 Hefei Metalforming with a short position of Hainan Haiyao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hefei Metalforming and Hainan Haiyao.

Diversification Opportunities for Hefei Metalforming and Hainan Haiyao

0.51

Correlation Coefficient

Hefei Metalforming  Hainan Haiyao

Very weak diversification

The 3 months correlation between Hefei and Hainan is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hefei Metalforming Mach and Hainan Haiyao Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Haiyao and Hefei Metalforming 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 Hefei Metalforming Mach are associated (or correlated) with Hainan Haiyao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Haiyao has no effect on the direction of Hefei Metalforming i.e., Hefei Metalforming and Hainan Haiyao go up and down completely randomly.

Pair Corralation between Hefei Metalforming and Hainan Haiyao

Assuming the 90 days trading horizon Hefei Metalforming Mach is expected to generate 1.15 times more return on investment than Hainan Haiyao. However, Hefei Metalforming is 1.15 times more volatile than Hainan Haiyao Co. It trades about 0.27 of its potential returns per unit of risk. Hainan Haiyao Co is currently generating about -0.01 per unit of risk. If you would invest  680.00  in Hefei Metalforming Mach on December 25, 2024 and sell it today you would earn a total of  444.00  from holding Hefei Metalforming Mach or generate 65.29% return on investment over 90 days.

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

Hefei Metalforming Mach  vs.  Hainan Haiyao Co

Hefei Metalforming Mach

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hefei Metalforming Mach are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hefei Metalforming sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Haiyao

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Haiyao Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hainan Haiyao is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hefei Metalforming and Hainan Haiyao

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

The idea behind Hefei Metalforming Mach and Hainan Haiyao Co 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.