Correlation Between Hisense Home and Haier Smart

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

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

Diversification Opportunities for Hisense Home and Haier Smart

-0.01

Correlation Coefficient

Hisense Home  Haier Smart

Good diversification

The 3 months correlation between Hisense and Haier is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hisense Home Appliances 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 Hisense Home 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 Hisense Home Appliances 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 Hisense Home i.e., Hisense Home and Haier Smart go up and down completely randomly.

Pair Corralation between Hisense Home and Haier Smart

Assuming the 90 days horizon Hisense Home Appliances is expected to generate 1.89 times more return on investment than Haier Smart. However, Hisense Home is 1.89 times more volatile than Haier Smart Home. It trades about 0.06 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.08 per unit of risk. If you would invest  297.00  in Hisense Home Appliances on December 21, 2024 and sell it today you would earn a total of  23.00  from holding Hisense Home Appliances or generate 7.74% return on investment over 90 days.

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

Hisense Home Appliances  vs.  Haier Smart Home

Hisense Home Appliances

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hisense Home Appliances are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hisense Home may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Haier Smart Home

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Haier Smart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hisense Home and Haier Smart

The main advantage of trading using opposite Hisense Home and Haier Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hisense Home 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 Hisense Home Appliances 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.