Correlation Between Hai An and VBC

Can any of the company-specific risk be diversified away by investing in both Hai An and VBC 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 VBC 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 VBC, you can compare the effects of market volatilities on Hai An and VBC 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 VBC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hai An and VBC.

Diversification Opportunities for Hai An and VBC

0.35

Correlation Coefficient

Hai An  VBC

Weak diversification

The 3 months correlation between Hai and VBC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hai An Transport and VBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VBC 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 VBC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VBC has no effect on the direction of Hai An i.e., Hai An and VBC go up and down completely randomly.

Pair Corralation between Hai An and VBC

Assuming the 90 days trading horizon Hai An Transport is expected to generate 1.29 times more return on investment than VBC. However, Hai An is 1.29 times more volatile than VBC. It trades about 0.17 of its potential returns per unit of risk. VBC is currently generating about 0.06 per unit of risk. 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	Very Weak
Accuracy	61.54%
Values	Daily Returns

Hai An Transport  vs.  VBC

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.

VBC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VBC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, VBC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hai An and VBC

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

The idea behind Hai An Transport and VBC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.