Correlation Between Southern Rubber and Hai An
Can any of the company-specific risk be diversified away by investing in both Southern Rubber 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 Southern Rubber and Hai An into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Rubber Industry and Hai An Transport, you can compare the effects of market volatilities on Southern Rubber 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 Southern Rubber with a short position of Hai An. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Rubber and Hai An.
Diversification Opportunities for Southern Rubber and Hai An
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and Hai is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Southern Rubber Industry 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 Southern Rubber 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 Southern Rubber Industry 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 Southern Rubber i.e., Southern Rubber and Hai An go up and down completely randomly.
Pair Corralation between Southern Rubber and Hai An
Assuming the 90 days trading horizon Southern Rubber is expected to generate 5.49 times less return on investment than Hai An. But when comparing it to its historical volatility, Southern Rubber Industry is 1.17 times less risky than Hai An. It trades about 0.02 of its potential returns per unit of risk. Hai An Transport is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,220,290 in Hai An Transport on October 25, 2024 and sell it today you would earn a total of 2,809,710 from holding Hai An Transport or generate 126.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.79% |
| Values | Daily Returns |
Southern Rubber Industry vs. Hai An Transport
Performance |
| Timeline |
| Southern Rubber Industry |
| Hai An Transport |
Southern Rubber and Hai An Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Rubber and Hai An
The main advantage of trading using opposite Southern Rubber and Hai An positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Rubber 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.| Southern Rubber vs. FIT INVEST JSC | Southern Rubber vs. Damsan JSC | Southern Rubber vs. An Phat Plastic | Southern Rubber vs. APG Securities Joint |
| Hai An vs. FIT INVEST JSC | Hai An vs. Damsan JSC | Hai An vs. An Phat Plastic | Hai An vs. APG Securities Joint |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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