Correlation Between Haier Smart and China Resources

Can any of the company-specific risk be diversified away by investing in both Haier Smart and China Resources 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 China Resources 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 China Resources Gas, you can compare the effects of market volatilities on Haier Smart and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haier Smart and China Resources.

Diversification Opportunities for Haier Smart and China Resources

0.57

Correlation Coefficient

Haier Smart  China Resources

Very weak diversification

The 3 months correlation between Haier and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and China Resources Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Gas 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Gas has no effect on the direction of Haier Smart i.e., Haier Smart and China Resources go up and down completely randomly.

Pair Corralation between Haier Smart and China Resources

Assuming the 90 days trading horizon Haier Smart Home is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, Haier Smart Home is 1.58 times less risky than China Resources. The stock trades about -0.01 of its potential returns per unit of risk. The China Resources Gas is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  362.00  in China Resources Gas on September 29, 2024 and sell it today you would earn a total of  2.00  from holding China Resources Gas or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Haier Smart Home  vs.  China Resources Gas

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.

China Resources Gas

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Gas are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Haier Smart and China Resources

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

The idea behind Haier Smart Home and China Resources Gas 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.