Correlation Between Hai An and Bich Chi

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

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

Diversification Opportunities for Hai An and Bich Chi

0.75

Correlation Coefficient

Hai An  Bich Chi

Poor diversification

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

Pair Corralation between Hai An and Bich Chi

Assuming the 90 days trading horizon Hai An is expected to generate 2.29 times less return on investment than Bich Chi. But when comparing it to its historical volatility, Hai An Transport is 1.75 times less risky than Bich Chi. It trades about 0.09 of its potential returns per unit of risk. Bich Chi Food is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,000,000  in Bich Chi Food on September 29, 2024 and sell it today you would earn a total of  150,000  from holding Bich Chi Food or generate 3.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	59.09%
Values	Daily Returns

Hai An Transport  vs.  Bich Chi Food

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.

Bich Chi Food

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bich Chi Food are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Bich Chi displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hai An and Bich Chi

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

The idea behind Hai An Transport and Bich Chi Food 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.