Correlation Between Yantai North and Hainan Haiqi

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

By analyzing existing cross correlation between Yantai North Andre and Hainan Haiqi Transportation, you can compare the effects of market volatilities on Yantai North and Hainan Haiqi 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 Yantai North with a short position of Hainan Haiqi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yantai North and Hainan Haiqi.

Diversification Opportunities for Yantai North and Hainan Haiqi

0.29

Correlation Coefficient

Yantai North  Hainan Haiqi

Modest diversification

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

Pair Corralation between Yantai North and Hainan Haiqi

Assuming the 90 days trading horizon Yantai North Andre is expected to generate 0.89 times more return on investment than Hainan Haiqi. However, Yantai North Andre is 1.13 times less risky than Hainan Haiqi. It trades about 0.1 of its potential returns per unit of risk. Hainan Haiqi Transportation is currently generating about 0.02 per unit of risk. If you would invest  2,523  in Yantai North Andre on October 23, 2024 and sell it today you would earn a total of  436.00  from holding Yantai North Andre or generate 17.28% return on investment over 90 days.

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

Yantai North Andre  vs.  Hainan Haiqi Transportation

Yantai North Andre

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yantai North Andre are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yantai North sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Haiqi Transpo

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Haiqi Transportation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Yantai North and Hainan Haiqi

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

The idea behind Yantai North Andre and Hainan Haiqi Transportation 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.