Correlation Between Hainan Mining and Hunan Investment

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

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

Diversification Opportunities for Hainan Mining and Hunan Investment

0.75

Correlation Coefficient

Hainan Mining  Hunan Investment

Poor diversification

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

Pair Corralation between Hainan Mining and Hunan Investment

Assuming the 90 days trading horizon Hainan Mining Co is expected to generate 0.91 times more return on investment than Hunan Investment. However, Hainan Mining Co is 1.09 times less risky than Hunan Investment. It trades about 0.05 of its potential returns per unit of risk. Hunan Investment Group is currently generating about 0.03 per unit of risk. 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

Hainan Mining Co  vs.  Hunan Investment Group

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.

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.

Pair Trading with Hainan Mining and Hunan Investment

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

The idea behind Hainan Mining Co and Hunan Investment Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.