Correlation Between South Basic and Hai An

Can any of the company-specific risk be diversified away by investing in both South Basic and Hai An 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 South Basic and Hai An into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between South Basic Chemicals and Hai An Transport, you can compare the effects of market volatilities on South Basic and Hai An 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 South Basic with a short position of Hai An. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Basic and Hai An.

Diversification Opportunities for South Basic and Hai An

0.65

Correlation Coefficient

South Basic  Hai An

Poor diversification

The 3 months correlation between South and Hai is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals and Hai An Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hai An Transport and South Basic 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 South Basic Chemicals are associated (or correlated) with Hai An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hai An Transport has no effect on the direction of South Basic i.e., South Basic and Hai An go up and down completely randomly.

Pair Corralation between South Basic and Hai An

Assuming the 90 days trading horizon South Basic is expected to generate 1.01 times less return on investment than Hai An. In addition to that, South Basic is 1.36 times more volatile than Hai An Transport. It trades about 0.12 of its total potential returns per unit of risk. Hai An Transport is currently generating about 0.17 per unit of volatility. If you would invest  4,065,000  in Hai An Transport on September 29, 2024 and sell it today you would earn a total of  835,000  from holding Hai An Transport or generate 20.54% return on investment over 90 days.

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

South Basic Chemicals  vs.  Hai An Transport

South Basic Chemicals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South Basic Chemicals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, South Basic displayed solid returns over the last few months and may actually be approaching a breakup point.

Hai An Transport

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hai An Transport are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Hai An displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with South Basic and Hai An

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

The idea behind South Basic Chemicals and Hai An Transport 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.