Correlation Between Hainan Haiqi and Guangdong Banbao

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

Diversification Opportunities for Hainan Haiqi and Guangdong Banbao

0.29

Correlation Coefficient

Hainan Haiqi  Guangdong Banbao

Modest diversification

The 3 months correlation between Hainan and Guangdong is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Haiqi Transportation and Guangdong Banbao Toy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Banbao Toy 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 Guangdong Banbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Banbao Toy has no effect on the direction of Hainan Haiqi i.e., Hainan Haiqi and Guangdong Banbao go up and down completely randomly.

Pair Corralation between Hainan Haiqi and Guangdong Banbao

Assuming the 90 days trading horizon Hainan Haiqi Transportation is expected to generate 0.61 times more return on investment than Guangdong Banbao. However, Hainan Haiqi Transportation is 1.64 times less risky than Guangdong Banbao. It trades about 0.01 of its potential returns per unit of risk. Guangdong Banbao Toy is currently generating about -0.16 per unit of risk. If you would invest  1,857  in Hainan Haiqi Transportation on December 26, 2024 and sell it today you would lose (7.00) from holding Hainan Haiqi Transportation or give up 0.38% of portfolio value over 90 days.

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

Hainan Haiqi Transportation  vs.  Guangdong Banbao Toy

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 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.

Guangdong Banbao Toy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Banbao Toy 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.

Pair Trading with Hainan Haiqi and Guangdong Banbao

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

The idea behind Hainan Haiqi Transportation and Guangdong Banbao Toy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.