Correlation Between Xingguang Agricultural and Hainan HNA

Can any of the company-specific risk be diversified away by investing in both Xingguang Agricultural and Hainan HNA 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 Xingguang Agricultural and Hainan HNA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xingguang Agricultural Mach and Hainan HNA Infrastructure, you can compare the effects of market volatilities on Xingguang Agricultural and Hainan HNA 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 Xingguang Agricultural with a short position of Hainan HNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xingguang Agricultural and Hainan HNA.

Diversification Opportunities for Xingguang Agricultural and Hainan HNA

0.65

Correlation Coefficient

Xingguang Agricultural  Hainan HNA

Poor diversification

The 3 months correlation between Xingguang and Hainan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xingguang Agricultural Mach and Hainan HNA Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan HNA Infrastructure and Xingguang Agricultural 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 Xingguang Agricultural Mach are associated (or correlated) with Hainan HNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan HNA Infrastructure has no effect on the direction of Xingguang Agricultural i.e., Xingguang Agricultural and Hainan HNA go up and down completely randomly.

Pair Corralation between Xingguang Agricultural and Hainan HNA

Assuming the 90 days trading horizon Xingguang Agricultural Mach is expected to under-perform the Hainan HNA. In addition to that, Xingguang Agricultural is 2.62 times more volatile than Hainan HNA Infrastructure. It trades about -0.31 of its total potential returns per unit of risk. Hainan HNA Infrastructure is currently generating about -0.31 per unit of volatility. If you would invest  395.00  in Hainan HNA Infrastructure on October 8, 2024 and sell it today you would lose (43.00) from holding Hainan HNA Infrastructure or give up 10.89% of portfolio value over 90 days.

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

Xingguang Agricultural Mach  vs.  Hainan HNA Infrastructure

Xingguang Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xingguang Agricultural Mach has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xingguang Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hainan HNA Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hainan HNA Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Xingguang Agricultural and Hainan HNA

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

The idea behind Xingguang Agricultural Mach and Hainan HNA Infrastructure 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.