Correlation Between BYD Co and Hainan Airlines

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

Diversification Opportunities for BYD Co and Hainan Airlines

BYDHainanDiversified AwayBYDHainanDiversified Away100%
-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between BYD and Hainan is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Hainan Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Airlines and BYD Co 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 BYD Co Ltd are associated (or correlated) with Hainan Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Airlines has no effect on the direction of BYD Co i.e., BYD Co and Hainan Airlines go up and down completely randomly.

Pair Corralation between BYD Co and Hainan Airlines

Assuming the 90 days trading horizon BYD Co Ltd is expected to under-perform the Hainan Airlines. But the stock apears to be less risky and, when comparing its historical volatility, BYD Co Ltd is 2.56 times less risky than Hainan Airlines. The stock trades about -0.06 of its potential returns per unit of risk. The Hainan Airlines Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Hainan Airlines Co on October 31, 2024 and sell it today you would earn a total of  25.00  from holding Hainan Airlines Co or generate 18.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

BYD Co Ltd  vs.  Hainan Airlines Co

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -20020406080
JavaScript chart by amCharts 3.21.15002594 600221
       Timeline  
BYD Co 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BYD Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BYD Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanJan270280290300310
Hainan Airlines 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanJan1.41.61.822.22.4

BYD Co and Hainan Airlines Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.79-2.09-1.39-0.690.01060.641.271.912.55 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15002594 600221
       Returns  

Pair Trading with BYD Co and Hainan Airlines

The main advantage of trading using opposite BYD Co and Hainan Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Co position performs unexpectedly, Hainan Airlines 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 Hainan Airlines will offset losses from the drop in Hainan Airlines' long position.
The idea behind BYD Co Ltd and Hainan Airlines Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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