Correlation Between Hai An and Global Electrical

Can any of the company-specific risk be diversified away by investing in both Hai An and Global Electrical 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 Global Electrical 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 Global Electrical Technology, you can compare the effects of market volatilities on Hai An and Global Electrical 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 Global Electrical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hai An and Global Electrical.

Diversification Opportunities for Hai An and Global Electrical

-0.85

Correlation Coefficient

Hai An  Global Electrical

Pay attention - limited upside

The 3 months correlation between Hai and Global is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hai An Transport and Global Electrical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Electrical 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 Global Electrical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Electrical has no effect on the direction of Hai An i.e., Hai An and Global Electrical go up and down completely randomly.

Pair Corralation between Hai An and Global Electrical

Assuming the 90 days trading horizon Hai An Transport is expected to generate 0.45 times more return on investment than Global Electrical. However, Hai An Transport is 2.2 times less risky than Global Electrical. It trades about 0.09 of its potential returns per unit of risk. Global Electrical Technology is currently generating about -0.12 per unit of risk. If you would invest  4,750,000  in Hai An Transport on September 16, 2024 and sell it today you would earn a total of  190,000  from holding Hai An Transport or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	68.18%
Values	Daily Returns

Hai An Transport  vs.  Global Electrical Technology

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.

Global Electrical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Electrical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Hai An and Global Electrical

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

The idea behind Hai An Transport and Global Electrical Technology 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..