Correlation Between Hainan Haiqi and Tjk Machinery

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

Diversification Opportunities for Hainan Haiqi and Tjk Machinery

0.67

Correlation Coefficient

Hainan Haiqi  Tjk Machinery

Poor diversification

The 3 months correlation between Hainan and Tjk is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Haiqi Transportation and Tjk Machinery Tianjin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tjk Machinery Tianjin 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 Tjk Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tjk Machinery Tianjin has no effect on the direction of Hainan Haiqi i.e., Hainan Haiqi and Tjk Machinery go up and down completely randomly.

Pair Corralation between Hainan Haiqi and Tjk Machinery

Assuming the 90 days trading horizon Hainan Haiqi Transportation is expected to generate 0.92 times more return on investment than Tjk Machinery. However, Hainan Haiqi Transportation is 1.09 times less risky than Tjk Machinery. It trades about 0.03 of its potential returns per unit of risk. Tjk Machinery Tianjin is currently generating about 0.01 per unit of risk. If you would invest  1,650  in Hainan Haiqi Transportation on October 9, 2024 and sell it today you would earn a total of  40.00  from holding Hainan Haiqi Transportation or generate 2.42% 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.  Tjk Machinery Tianjin

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.

Tjk Machinery Tianjin

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Hainan Haiqi Transportation and Tjk Machinery Tianjin 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.