Correlation Between Huatian Hotel and Ningbo Bird

Can any of the company-specific risk be diversified away by investing in both Huatian Hotel and Ningbo Bird 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 Huatian Hotel and Ningbo Bird into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huatian Hotel Group and Ningbo Bird Co, you can compare the effects of market volatilities on Huatian Hotel and Ningbo Bird 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 Huatian Hotel with a short position of Ningbo Bird. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huatian Hotel and Ningbo Bird.

Diversification Opportunities for Huatian Hotel and Ningbo Bird

0.68

Correlation Coefficient

Huatian Hotel  Ningbo Bird

Poor diversification

The 3 months correlation between Huatian and Ningbo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Huatian Hotel Group and Ningbo Bird Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Bird and Huatian Hotel 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 Huatian Hotel Group are associated (or correlated) with Ningbo Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Bird has no effect on the direction of Huatian Hotel i.e., Huatian Hotel and Ningbo Bird go up and down completely randomly.

Pair Corralation between Huatian Hotel and Ningbo Bird

Assuming the 90 days trading horizon Huatian Hotel Group is expected to under-perform the Ningbo Bird. But the stock apears to be less risky and, when comparing its historical volatility, Huatian Hotel Group is 1.15 times less risky than Ningbo Bird. The stock trades about -0.03 of its potential returns per unit of risk. The Ningbo Bird Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  482.00  in Ningbo Bird Co on September 28, 2024 and sell it today you would earn a total of  11.00  from holding Ningbo Bird Co or generate 2.28% return on investment over 90 days.

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

Huatian Hotel Group  vs.  Ningbo Bird Co

Huatian Hotel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huatian Hotel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ningbo Bird

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Bird Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Bird sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huatian Hotel and Ningbo Bird

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

The idea behind Huatian Hotel Group and Ningbo Bird Co 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.