Correlation Between Xizi Clean and China Eastern

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

By analyzing existing cross correlation between Xizi Clean Energy and China Eastern Airlines, you can compare the effects of market volatilities on Xizi Clean and China Eastern 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 Xizi Clean with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xizi Clean and China Eastern.

Diversification Opportunities for Xizi Clean and China Eastern

-0.51

Correlation Coefficient

Xizi Clean  China Eastern

Excellent diversification

The 3 months correlation between Xizi and China is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Xizi Clean Energy and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines and Xizi Clean 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 Xizi Clean Energy are associated (or correlated) with China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of Xizi Clean i.e., Xizi Clean and China Eastern go up and down completely randomly.

Pair Corralation between Xizi Clean and China Eastern

Assuming the 90 days trading horizon Xizi Clean Energy is expected to generate 1.44 times more return on investment than China Eastern. However, Xizi Clean is 1.44 times more volatile than China Eastern Airlines. It trades about 0.13 of its potential returns per unit of risk. China Eastern Airlines is currently generating about -0.07 per unit of risk. If you would invest  1,127  in Xizi Clean Energy on December 25, 2024 and sell it today you would earn a total of  207.00  from holding Xizi Clean Energy or generate 18.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Xizi Clean Energy  vs.  China Eastern Airlines

Xizi Clean Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xizi Clean Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xizi Clean sustained solid returns over the last few months and may actually be approaching a breakup point.

China Eastern Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Eastern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Xizi Clean and China Eastern

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

The idea behind Xizi Clean Energy and China Eastern Airlines 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 Stocks Directory module to find actively traded stocks across global markets.