Correlation Between Ningxia Younglight and Air China

Can any of the company-specific risk be diversified away by investing in both Ningxia Younglight and Air China 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 Ningxia Younglight and Air China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ningxia Younglight Chemicals and Air China Ltd, you can compare the effects of market volatilities on Ningxia Younglight and Air China 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 Ningxia Younglight with a short position of Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Younglight and Air China.

Diversification Opportunities for Ningxia Younglight and Air China

0.61

Correlation Coefficient

Ningxia Younglight  Air China

Poor diversification

The 3 months correlation between Ningxia and Air is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Younglight Chemicals and Air China Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China and Ningxia Younglight 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 Ningxia Younglight Chemicals are associated (or correlated) with Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China has no effect on the direction of Ningxia Younglight i.e., Ningxia Younglight and Air China go up and down completely randomly.

Pair Corralation between Ningxia Younglight and Air China

Assuming the 90 days trading horizon Ningxia Younglight Chemicals is expected to under-perform the Air China. In addition to that, Ningxia Younglight is 1.26 times more volatile than Air China Ltd. It trades about -0.1 of its total potential returns per unit of risk. Air China Ltd is currently generating about -0.12 per unit of volatility. If you would invest  830.00  in Air China Ltd on December 24, 2024 and sell it today you would lose (105.00) from holding Air China Ltd or give up 12.65% of portfolio value over 90 days.

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

Ningxia Younglight Chemicals  vs.  Air China Ltd

Ningxia Younglight

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningxia Younglight Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Air China

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air China Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ningxia Younglight and Air China

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

The idea behind Ningxia Younglight Chemicals and Air China Ltd 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.