Correlation Between Haier Smart and CN MODERN

Can any of the company-specific risk be diversified away by investing in both Haier Smart and CN MODERN 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 Haier Smart and CN MODERN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haier Smart Home and CN MODERN DAIRY, you can compare the effects of market volatilities on Haier Smart and CN MODERN 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 Haier Smart with a short position of CN MODERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haier Smart and CN MODERN.

Diversification Opportunities for Haier Smart and CN MODERN

0.25

Correlation Coefficient

Haier Smart  CN MODERN

Modest diversification

The 3 months correlation between Haier and 07M is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY and Haier Smart 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 Haier Smart Home are associated (or correlated) with CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of Haier Smart i.e., Haier Smart and CN MODERN go up and down completely randomly.

Pair Corralation between Haier Smart and CN MODERN

Assuming the 90 days trading horizon Haier Smart Home is expected to generate 0.43 times more return on investment than CN MODERN. However, Haier Smart Home is 2.31 times less risky than CN MODERN. It trades about 0.07 of its potential returns per unit of risk. CN MODERN DAIRY is currently generating about 0.02 per unit of risk. If you would invest  172.00  in Haier Smart Home on October 12, 2024 and sell it today you would earn a total of  8.00  from holding Haier Smart Home or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Haier Smart Home  vs.  CN MODERN DAIRY

Haier Smart Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haier Smart Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Haier Smart is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CN MODERN DAIRY

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, CN MODERN may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Haier Smart and CN MODERN

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

The idea behind Haier Smart Home and CN MODERN DAIRY 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.