Correlation Between Hainan Haiqi and Advanced Technology

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

By analyzing existing cross correlation between Hainan Haiqi Transportation and Advanced Technology Materials, you can compare the effects of market volatilities on Hainan Haiqi and Advanced Technology 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 Haiqi with a short position of Advanced Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Haiqi and Advanced Technology.

Diversification Opportunities for Hainan Haiqi and Advanced Technology

0.86

Correlation Coefficient

Hainan Haiqi  Advanced Technology

Very poor diversification

The 3 months correlation between Hainan and Advanced is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Haiqi Transportation and Advanced Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Technology and Hainan Haiqi 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 Haiqi Transportation are associated (or correlated) with Advanced Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Technology has no effect on the direction of Hainan Haiqi i.e., Hainan Haiqi and Advanced Technology go up and down completely randomly.

Pair Corralation between Hainan Haiqi and Advanced Technology

Assuming the 90 days trading horizon Hainan Haiqi is expected to generate 3.69 times less return on investment than Advanced Technology. But when comparing it to its historical volatility, Hainan Haiqi Transportation is 1.04 times less risky than Advanced Technology. It trades about 0.03 of its potential returns per unit of risk. Advanced Technology Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  978.00  in Advanced Technology Materials on September 28, 2024 and sell it today you would earn a total of  158.00  from holding Advanced Technology Materials or generate 16.16% return on investment over 90 days.

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

Hainan Haiqi Transportation  vs.  Advanced Technology Materials

Hainan Haiqi Transpo

Risk-Adjusted Performance

2 of 100

Weak

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

Advanced Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Technology Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Haiqi and Advanced Technology

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

The idea behind Hainan Haiqi Transportation and Advanced Technology Materials 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 Transaction History module to view history of all your transactions and understand their impact on performance.