Correlation Between Hai An and DIC Holdings

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

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

Diversification Opportunities for Hai An and DIC Holdings

0.88

Correlation Coefficient

Hai An  DIC Holdings

Very poor diversification

The 3 months correlation between Hai and DIC is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hai An Transport and DIC Holdings Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIC Holdings Construction and Hai An 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 Hai An Transport are associated (or correlated) with DIC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIC Holdings Construction has no effect on the direction of Hai An i.e., Hai An and DIC Holdings go up and down completely randomly.

Pair Corralation between Hai An and DIC Holdings

Assuming the 90 days trading horizon Hai An Transport is expected to generate 0.48 times more return on investment than DIC Holdings. However, Hai An Transport is 2.1 times less risky than DIC Holdings. It trades about 0.07 of its potential returns per unit of risk. DIC Holdings Construction is currently generating about -0.05 per unit of risk. If you would invest  3,730,435  in Hai An Transport on September 16, 2024 and sell it today you would earn a total of  1,209,565  from holding Hai An Transport or generate 32.42% return on investment over 90 days.

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

Hai An Transport  vs.  DIC Holdings Construction

Hai An Transport

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hai An Transport are ranked lower than 17 (%) 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.

DIC Holdings Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hai An and DIC Holdings

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

The idea behind Hai An Transport and DIC Holdings Construction 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.