Correlation Between Hainan Jinpan and Biwin Storage

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

By analyzing existing cross correlation between Hainan Jinpan Smart and Biwin Storage Technology, you can compare the effects of market volatilities on Hainan Jinpan and Biwin Storage 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 Jinpan with a short position of Biwin Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Jinpan and Biwin Storage.

Diversification Opportunities for Hainan Jinpan and Biwin Storage

0.54

Correlation Coefficient

Hainan Jinpan  Biwin Storage

Very weak diversification

The 3 months correlation between Hainan and Biwin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Jinpan Smart and Biwin Storage Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biwin Storage Technology and Hainan Jinpan 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 Jinpan Smart are associated (or correlated) with Biwin Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biwin Storage Technology has no effect on the direction of Hainan Jinpan i.e., Hainan Jinpan and Biwin Storage go up and down completely randomly.

Pair Corralation between Hainan Jinpan and Biwin Storage

Assuming the 90 days trading horizon Hainan Jinpan Smart is expected to generate 1.25 times more return on investment than Biwin Storage. However, Hainan Jinpan is 1.25 times more volatile than Biwin Storage Technology. It trades about 0.32 of its potential returns per unit of risk. Biwin Storage Technology is currently generating about 0.02 per unit of risk. If you would invest  3,189  in Hainan Jinpan Smart on October 9, 2024 and sell it today you would earn a total of  1,023  from holding Hainan Jinpan Smart or generate 32.08% return on investment over 90 days.

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

Hainan Jinpan Smart  vs.  Biwin Storage Technology

Hainan Jinpan Smart

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Jinpan Smart are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Jinpan sustained solid returns over the last few months and may actually be approaching a breakup point.

Biwin Storage Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biwin Storage Technology 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hainan Jinpan and Biwin Storage

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

The idea behind Hainan Jinpan Smart and Biwin Storage Technology 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.