Correlation Between Hainan Haiqi and Xinjiang Beixin

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

Diversification Opportunities for Hainan Haiqi and Xinjiang Beixin

0.72

Correlation Coefficient

Hainan Haiqi  Xinjiang Beixin

Poor diversification

The 3 months correlation between Hainan and Xinjiang is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Haiqi Transportation and Xinjiang Beixin RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Beixin Road 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 Xinjiang Beixin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Beixin Road has no effect on the direction of Hainan Haiqi i.e., Hainan Haiqi and Xinjiang Beixin go up and down completely randomly.

Pair Corralation between Hainan Haiqi and Xinjiang Beixin

Assuming the 90 days trading horizon Hainan Haiqi is expected to generate 2.23 times less return on investment than Xinjiang Beixin. But when comparing it to its historical volatility, Hainan Haiqi Transportation is 1.12 times less risky than Xinjiang Beixin. It trades about 0.02 of its potential returns per unit of risk. Xinjiang Beixin RoadBridge is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  352.00  in Xinjiang Beixin RoadBridge on October 23, 2024 and sell it today you would earn a total of  13.00  from holding Xinjiang Beixin RoadBridge or generate 3.69% return on investment over 90 days.

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

Hainan Haiqi Transportation  vs.  Xinjiang Beixin RoadBridge

Hainan Haiqi Transpo

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Haiqi Transportation are ranked lower than 1 (%) 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.

Xinjiang Beixin Road

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Beixin RoadBridge are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Beixin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hainan Haiqi and Xinjiang Beixin

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

The idea behind Hainan Haiqi Transportation and Xinjiang Beixin RoadBridge 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.