Correlation Between Hunan Investment and Hainan Mining

Can any of the company-specific risk be diversified away by investing in both Hunan Investment and Hainan Mining 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 Hunan Investment and Hainan Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Hunan Investment and Hainan Mining

0.75

Correlation Coefficient

Hunan Investment  Hainan Mining

Poor diversification

The 3 months correlation between Hunan and Hainan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Hainan Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Mining and Hunan Investment 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 Hunan Investment Group are associated (or correlated) with Hainan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Mining has no effect on the direction of Hunan Investment i.e., Hunan Investment and Hainan Mining go up and down completely randomly.

Pair Corralation between Hunan Investment and Hainan Mining

Assuming the 90 days trading horizon Hunan Investment is expected to generate 1.4 times less return on investment than Hainan Mining. In addition to that, Hunan Investment is 1.09 times more volatile than Hainan Mining Co. It trades about 0.03 of its total potential returns per unit of risk. Hainan Mining Co is currently generating about 0.05 per unit of volatility. If you would invest  705.00  in Hainan Mining Co on September 29, 2024 and sell it today you would earn a total of  39.00  from holding Hainan Mining Co or generate 5.53% return on investment over 90 days.

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

Hunan Investment Group  vs.  Hainan Mining Co

Hunan Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hunan Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hainan Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Mining Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hunan Investment and Hainan Mining

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

The idea behind Hunan Investment Group and Hainan Mining 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.