Correlation Between Hainan Haiqi and Shanghai Ziyan

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

Diversification Opportunities for Hainan Haiqi and Shanghai Ziyan

0.43

Correlation Coefficient

Hainan Haiqi  Shanghai Ziyan

Very weak diversification

The 3 months correlation between Hainan and Shanghai is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Haiqi Transportation and Shanghai Ziyan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Ziyan Foods 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 Shanghai Ziyan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Ziyan Foods has no effect on the direction of Hainan Haiqi i.e., Hainan Haiqi and Shanghai Ziyan go up and down completely randomly.

Pair Corralation between Hainan Haiqi and Shanghai Ziyan

Assuming the 90 days trading horizon Hainan Haiqi Transportation is expected to under-perform the Shanghai Ziyan. But the stock apears to be less risky and, when comparing its historical volatility, Hainan Haiqi Transportation is 1.27 times less risky than Shanghai Ziyan. The stock trades about -0.12 of its potential returns per unit of risk. The Shanghai Ziyan Foods is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,874  in Shanghai Ziyan Foods on December 2, 2024 and sell it today you would lose (110.00) from holding Shanghai Ziyan Foods or give up 5.87% of portfolio value over 90 days.

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

Hainan Haiqi Transportation  vs.  Shanghai Ziyan Foods

Hainan Haiqi Transpo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Haiqi Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shanghai Ziyan Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Ziyan Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai Ziyan 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 Shanghai Ziyan

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

The idea behind Hainan Haiqi Transportation and Shanghai Ziyan Foods 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.