Correlation Between Gansu Huangtai and Air China

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

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

Diversification Opportunities for Gansu Huangtai and Air China

0.77

Correlation Coefficient

Gansu Huangtai  Air China

Poor diversification

The 3 months correlation between Gansu and Air is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Huangtai Wine marketing and Air China Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China and Gansu Huangtai 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 Gansu Huangtai Wine marketing 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 Gansu Huangtai i.e., Gansu Huangtai and Air China go up and down completely randomly.

Pair Corralation between Gansu Huangtai and Air China

Assuming the 90 days trading horizon Gansu Huangtai Wine marketing is expected to generate 1.82 times more return on investment than Air China. However, Gansu Huangtai is 1.82 times more volatile than Air China Ltd. It trades about 0.01 of its potential returns per unit of risk. Air China Ltd is currently generating about -0.03 per unit of risk. If you would invest  1,739  in Gansu Huangtai Wine marketing on October 4, 2024 and sell it today you would lose (89.00) from holding Gansu Huangtai Wine marketing or give up 5.12% of portfolio value over 90 days.

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

Gansu Huangtai Wine marketing  vs.  Air China Ltd

Gansu Huangtai Wine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Huangtai Wine marketing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Huangtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Air China

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Air China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gansu Huangtai and Air China

The main advantage of trading using opposite Gansu Huangtai and Air China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gansu Huangtai 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 Gansu Huangtai Wine marketing 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.