Correlation Between Hainan HNA and Huaxi Securities

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Can any of the company-specific risk be diversified away by investing in both Hainan HNA and Huaxi Securities 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 Hainan HNA and Huaxi Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hainan HNA Infrastructure and Huaxi Securities Co, you can compare the effects of market volatilities on Hainan HNA and Huaxi Securities 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 Hainan HNA with a short position of Huaxi Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan HNA and Huaxi Securities.

Diversification Opportunities for Hainan HNA and Huaxi Securities

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hainan and Huaxi is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hainan HNA Infrastructure and Huaxi Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxi Securities and Hainan HNA 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 Hainan HNA Infrastructure are associated (or correlated) with Huaxi Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxi Securities has no effect on the direction of Hainan HNA i.e., Hainan HNA and Huaxi Securities go up and down completely randomly.

Pair Corralation between Hainan HNA and Huaxi Securities

Assuming the 90 days trading horizon Hainan HNA Infrastructure is expected to under-perform the Huaxi Securities. But the stock apears to be less risky and, when comparing its historical volatility, Hainan HNA Infrastructure is 1.09 times less risky than Huaxi Securities. The stock trades about -0.01 of its potential returns per unit of risk. The Huaxi Securities Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  818.00  in Huaxi Securities Co on September 29, 2024 and sell it today you would earn a total of  51.00  from holding Huaxi Securities Co or generate 6.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.78%
ValuesDaily Returns

Hainan HNA Infrastructure  vs.  Huaxi Securities Co

 Performance 
       Timeline  
Hainan HNA Infrastructure 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Hainan HNA Infrastructure are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hainan HNA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Huaxi Securities 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Huaxi Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Huaxi Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hainan HNA and Huaxi Securities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hainan HNA and Huaxi Securities

The main advantage of trading using opposite Hainan HNA and Huaxi Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hainan HNA position performs unexpectedly, Huaxi Securities 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 Huaxi Securities will offset losses from the drop in Huaxi Securities' long position.
The idea behind Hainan HNA Infrastructure and Huaxi Securities 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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