Correlation Between Simei Media and China Eastern

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

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

Diversification Opportunities for Simei Media and China Eastern

0.69

Correlation Coefficient

Simei Media  China Eastern

Poor diversification

The 3 months correlation between Simei and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Simei Media Co 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 Simei Media 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 Simei Media Co 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 Simei Media i.e., Simei Media and China Eastern go up and down completely randomly.

Pair Corralation between Simei Media and China Eastern

Assuming the 90 days trading horizon Simei Media Co is expected to generate 3.22 times more return on investment than China Eastern. However, Simei Media is 3.22 times more volatile than China Eastern Airlines. It trades about 0.06 of its potential returns per unit of risk. China Eastern Airlines is currently generating about 0.05 per unit of risk. If you would invest  473.00  in Simei Media Co on October 25, 2024 and sell it today you would earn a total of  54.00  from holding Simei Media Co or generate 11.42% return on investment over 90 days.

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

Simei Media Co  vs.  China Eastern Airlines

Simei Media

Risk-Adjusted Performance

4 of 100

Insignificant

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

China Eastern Airlines

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Eastern Airlines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Eastern is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Simei Media and China Eastern

The main advantage of trading using opposite Simei Media and China Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simei Media 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 Simei Media Co 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.