Correlation Between Hainan Haiqi and Fujian Anjoy

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

By analyzing existing cross correlation between Hainan Haiqi Transportation and Fujian Anjoy Foods, you can compare the effects of market volatilities on Hainan Haiqi and Fujian Anjoy 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 Haiqi with a short position of Fujian Anjoy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Haiqi and Fujian Anjoy.

Diversification Opportunities for Hainan Haiqi and Fujian Anjoy

0.62

Correlation Coefficient

Hainan Haiqi  Fujian Anjoy

Poor diversification

The 3 months correlation between Hainan and Fujian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Haiqi Transportation and Fujian Anjoy Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Anjoy Foods and Hainan Haiqi 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 Haiqi Transportation are associated (or correlated) with Fujian Anjoy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Anjoy Foods has no effect on the direction of Hainan Haiqi i.e., Hainan Haiqi and Fujian Anjoy go up and down completely randomly.

Pair Corralation between Hainan Haiqi and Fujian Anjoy

Assuming the 90 days trading horizon Hainan Haiqi Transportation is expected to generate 1.17 times more return on investment than Fujian Anjoy. However, Hainan Haiqi is 1.17 times more volatile than Fujian Anjoy Foods. It trades about -0.01 of its potential returns per unit of risk. Fujian Anjoy Foods is currently generating about -0.04 per unit of risk. If you would invest  2,930  in Hainan Haiqi Transportation on September 14, 2024 and sell it today you would lose (792.00) from holding Hainan Haiqi Transportation or give up 27.03% of portfolio value over 90 days.

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

Hainan Haiqi Transportation  vs.  Fujian Anjoy Foods

Hainan Haiqi Transpo

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Haiqi Transportation are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Haiqi sustained solid returns over the last few months and may actually be approaching a breakup point.

Fujian Anjoy Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Anjoy Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Anjoy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Haiqi and Fujian Anjoy

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

The idea behind Hainan Haiqi Transportation and Fujian Anjoy Foods 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.