Correlation Between Sao Ta and Hai An

Can any of the company-specific risk be diversified away by investing in both Sao Ta and Hai An 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 Sao Ta and Hai An into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sao Ta Foods and Hai An Transport, you can compare the effects of market volatilities on Sao Ta and Hai An 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 Sao Ta with a short position of Hai An. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Ta and Hai An.

Diversification Opportunities for Sao Ta and Hai An

0.3

Correlation Coefficient

Sao Ta  Hai An

Weak diversification

The 3 months correlation between Sao and Hai is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods and Hai An Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hai An Transport and Sao Ta 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 Sao Ta Foods are associated (or correlated) with Hai An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hai An Transport has no effect on the direction of Sao Ta i.e., Sao Ta and Hai An go up and down completely randomly.

Pair Corralation between Sao Ta and Hai An

Assuming the 90 days trading horizon Sao Ta is expected to generate 2.18 times less return on investment than Hai An. But when comparing it to its historical volatility, Sao Ta Foods is 1.67 times less risky than Hai An. It trades about 0.07 of its potential returns per unit of risk. Hai An Transport is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,823,188  in Hai An Transport on September 17, 2024 and sell it today you would earn a total of  3,116,812  from holding Hai An Transport or generate 170.95% return on investment over 90 days.

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

Sao Ta Foods  vs.  Hai An Transport

Sao Ta Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sao Ta Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hai An Transport

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hai An Transport are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Hai An displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sao Ta and Hai An

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

The idea behind Sao Ta Foods and Hai An Transport 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.