Correlation Between Jinhui Liquor and Hainan Haiqi

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

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

Diversification Opportunities for Jinhui Liquor and Hainan Haiqi

0.82

Correlation Coefficient

Jinhui Liquor  Hainan Haiqi

Very poor diversification

The 3 months correlation between Jinhui and Hainan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Hainan Haiqi Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Haiqi Transpo and Jinhui Liquor 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 Jinhui Liquor Co are associated (or correlated) with Hainan Haiqi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Haiqi Transpo has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Hainan Haiqi go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Hainan Haiqi

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Hainan Haiqi. But the stock apears to be less risky and, when comparing its historical volatility, Jinhui Liquor Co is 1.34 times less risky than Hainan Haiqi. The stock trades about -0.08 of its potential returns per unit of risk. The Hainan Haiqi Transportation is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,968  in Hainan Haiqi Transportation on September 26, 2024 and sell it today you would lose (125.00) from holding Hainan Haiqi Transportation or give up 6.35% of portfolio value over 90 days.

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

Jinhui Liquor Co  vs.  Hainan Haiqi Transportation

Jinhui Liquor

Risk-Adjusted Performance

3 of 100

Insignificant

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

Hainan Haiqi Transpo

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Haiqi Transportation are ranked lower than 6 (%) 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.

Pair Trading with Jinhui Liquor and Hainan Haiqi

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

The idea behind Jinhui Liquor Co and Hainan Haiqi Transportation 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.