Correlation Between Hainan Haiqi and Dr Peng

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

Diversification Opportunities for Hainan Haiqi and Dr Peng

0.72

Correlation Coefficient

Hainan Haiqi  Dr Peng

Poor diversification

The 3 months correlation between Hainan and 600804 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Haiqi Transportation and Dr Peng Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Peng Telecom 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 Dr Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Peng Telecom has no effect on the direction of Hainan Haiqi i.e., Hainan Haiqi and Dr Peng go up and down completely randomly.

Pair Corralation between Hainan Haiqi and Dr Peng

Assuming the 90 days trading horizon Hainan Haiqi Transportation is expected to generate 0.81 times more return on investment than Dr Peng. However, Hainan Haiqi Transportation is 1.23 times less risky than Dr Peng. It trades about -0.06 of its potential returns per unit of risk. Dr Peng Telecom is currently generating about -0.07 per unit of risk. If you would invest  2,010  in Hainan Haiqi Transportation on September 29, 2024 and sell it today you would lose (113.00) from holding Hainan Haiqi Transportation or give up 5.62% of portfolio value over 90 days.

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

Hainan Haiqi Transportation  vs.  Dr Peng Telecom

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 weak basic indicators, Hainan Haiqi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dr Peng Telecom

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Haiqi and Dr Peng

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

The idea behind Hainan Haiqi Transportation and Dr Peng Telecom 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.