Correlation Between Olympic Circuit and Hainan HNA

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Can any of the company-specific risk be diversified away by investing in both Olympic Circuit 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 Olympic Circuit and Hainan HNA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Circuit Technology and Hainan HNA Infrastructure, you can compare the effects of market volatilities on Olympic Circuit 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 Olympic Circuit with a short position of Hainan HNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Circuit and Hainan HNA.

Diversification Opportunities for Olympic Circuit and Hainan HNA

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Olympic and Hainan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Circuit Technology 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 Olympic Circuit 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 Olympic Circuit Technology 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 Olympic Circuit i.e., Olympic Circuit and Hainan HNA go up and down completely randomly.

Pair Corralation between Olympic Circuit and Hainan HNA

Assuming the 90 days trading horizon Olympic Circuit Technology is expected to generate 1.75 times more return on investment than Hainan HNA. However, Olympic Circuit is 1.75 times more volatile than Hainan HNA Infrastructure. It trades about 0.06 of its potential returns per unit of risk. Hainan HNA Infrastructure is currently generating about -0.02 per unit of risk. If you would invest  1,467  in Olympic Circuit Technology on October 4, 2024 and sell it today you would earn a total of  1,473  from holding Olympic Circuit Technology or generate 100.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.79%
ValuesDaily Returns

Olympic Circuit Technology  vs.  Hainan HNA Infrastructure

 Performance 
       Timeline  
Olympic Circuit Tech 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Circuit Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Olympic Circuit may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Hainan HNA Infrastructure 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 somewhat strong basic indicators, Hainan HNA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Olympic Circuit and Hainan HNA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Olympic Circuit and Hainan HNA

The main advantage of trading using opposite Olympic Circuit and Hainan HNA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Circuit 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 Olympic Circuit Technology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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