Correlation Between Guangzhou Haige and Harbin Air

Can any of the company-specific risk be diversified away by investing in both Guangzhou Haige and Harbin Air 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 Guangzhou Haige and Harbin Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou Haige Communications and Harbin Air Conditioning, you can compare the effects of market volatilities on Guangzhou Haige and Harbin Air 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 Guangzhou Haige with a short position of Harbin Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Haige and Harbin Air.

Diversification Opportunities for Guangzhou Haige and Harbin Air

0.94

Correlation Coefficient

Guangzhou Haige  Harbin Air

Almost no diversification

The 3 months correlation between Guangzhou and Harbin is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haige Communications and Harbin Air Conditioning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbin Air Conditioning and Guangzhou Haige 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 Guangzhou Haige Communications are associated (or correlated) with Harbin Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbin Air Conditioning has no effect on the direction of Guangzhou Haige i.e., Guangzhou Haige and Harbin Air go up and down completely randomly.

Pair Corralation between Guangzhou Haige and Harbin Air

Assuming the 90 days trading horizon Guangzhou Haige Communications is expected to generate 1.31 times more return on investment than Harbin Air. However, Guangzhou Haige is 1.31 times more volatile than Harbin Air Conditioning. It trades about 0.2 of its potential returns per unit of risk. Harbin Air Conditioning is currently generating about 0.24 per unit of risk. If you would invest  880.00  in Guangzhou Haige Communications on September 5, 2024 and sell it today you would earn a total of  395.00  from holding Guangzhou Haige Communications or generate 44.89% return on investment over 90 days.

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

Guangzhou Haige Communications  vs.  Harbin Air Conditioning

Guangzhou Haige Comm

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haige sustained solid returns over the last few months and may actually be approaching a breakup point.

Harbin Air Conditioning

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Air Conditioning are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harbin Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Haige and Harbin Air

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

The idea behind Guangzhou Haige Communications and Harbin Air Conditioning 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.