Correlation Between Harbin Air and Der International

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Can any of the company-specific risk be diversified away by investing in both Harbin Air and Der International 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 Harbin Air and Der International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harbin Air Conditioning and Der International Home, you can compare the effects of market volatilities on Harbin Air and Der International 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 Harbin Air with a short position of Der International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbin Air and Der International.

Diversification Opportunities for Harbin Air and Der International

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Harbin and Der is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Air Conditioning and Der International Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Der International Home and Harbin Air 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 Harbin Air Conditioning are associated (or correlated) with Der International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Der International Home has no effect on the direction of Harbin Air i.e., Harbin Air and Der International go up and down completely randomly.

Pair Corralation between Harbin Air and Der International

Assuming the 90 days trading horizon Harbin Air Conditioning is expected to generate 0.98 times more return on investment than Der International. However, Harbin Air Conditioning is 1.02 times less risky than Der International. It trades about 0.0 of its potential returns per unit of risk. Der International Home is currently generating about 0.0 per unit of risk. If you would invest  539.00  in Harbin Air Conditioning on August 27, 2024 and sell it today you would lose (58.00) from holding Harbin Air Conditioning or give up 10.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Harbin Air Conditioning  vs.  Der International Home

 Performance 
       Timeline  
Harbin Air Conditioning 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Air Conditioning are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harbin Air sustained solid returns over the last few months and may actually be approaching a breakup point.
Der International Home 

Risk-Adjusted Performance

11 of 100

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

Harbin Air and Der International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Harbin Air and Der International

The main advantage of trading using opposite Harbin Air and Der International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harbin Air position performs unexpectedly, Der International 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 Der International will offset losses from the drop in Der International's long position.
The idea behind Harbin Air Conditioning and Der International Home 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.
Check out your portfolio center.
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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