Correlation Between Strategic Investments and Haier Smart

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

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

Diversification Opportunities for Strategic Investments and Haier Smart

-0.07

Correlation Coefficient

Strategic Investments  Haier Smart

Good diversification

The 3 months correlation between Strategic and Haier is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home and Strategic Investments 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 Strategic Investments AS are associated (or correlated) with Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Strategic Investments i.e., Strategic Investments and Haier Smart go up and down completely randomly.

Pair Corralation between Strategic Investments and Haier Smart

Assuming the 90 days horizon Strategic Investments AS is expected to generate 2.74 times more return on investment than Haier Smart. However, Strategic Investments is 2.74 times more volatile than Haier Smart Home. It trades about 0.04 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.07 per unit of risk. If you would invest  8.92  in Strategic Investments AS on September 14, 2024 and sell it today you would earn a total of  3.08  from holding Strategic Investments AS or generate 34.53% return on investment over 90 days.

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

Strategic Investments AS  vs.  Haier Smart Home

Strategic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Haier Smart Home

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Haier Smart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Strategic Investments and Haier Smart

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

The idea behind Strategic Investments AS and Haier Smart Home 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.