Correlation Between Zhejiang Construction and Juneyao Airlines

Can any of the company-specific risk be diversified away by investing in both Zhejiang Construction and Juneyao 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 Zhejiang Construction and Juneyao Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Construction Investment and Juneyao Airlines, you can compare the effects of market volatilities on Zhejiang Construction and Juneyao 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 Zhejiang Construction with a short position of Juneyao Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Construction and Juneyao Airlines.

Diversification Opportunities for Zhejiang Construction and Juneyao Airlines

0.7

Correlation Coefficient

Zhejiang Construction  Juneyao Airlines

Poor diversification

The 3 months correlation between Zhejiang and Juneyao is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Construction Investme and Juneyao Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juneyao Airlines and Zhejiang Construction 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 Zhejiang Construction Investment are associated (or correlated) with Juneyao Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juneyao Airlines has no effect on the direction of Zhejiang Construction i.e., Zhejiang Construction and Juneyao Airlines go up and down completely randomly.

Pair Corralation between Zhejiang Construction and Juneyao Airlines

Assuming the 90 days trading horizon Zhejiang Construction Investment is expected to under-perform the Juneyao Airlines. In addition to that, Zhejiang Construction is 1.58 times more volatile than Juneyao Airlines. It trades about -0.01 of its total potential returns per unit of risk. Juneyao Airlines is currently generating about 0.01 per unit of volatility. If you would invest  1,290  in Juneyao Airlines on October 9, 2024 and sell it today you would earn a total of  2.00  from holding Juneyao Airlines or generate 0.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Zhejiang Construction Investme  vs.  Juneyao Airlines

Zhejiang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Construction Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Juneyao Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Juneyao Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Juneyao Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhejiang Construction and Juneyao Airlines

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

The idea behind Zhejiang Construction Investment and Juneyao 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.