Correlation Between Anhui Huaren and Juneyao Airlines

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

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

Diversification Opportunities for Anhui Huaren and Juneyao Airlines

0.81

Correlation Coefficient

Anhui Huaren  Juneyao Airlines

Very poor diversification

The 3 months correlation between Anhui and Juneyao is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Huaren Health and Juneyao Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juneyao Airlines and Anhui Huaren 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 Anhui Huaren Health 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 Anhui Huaren i.e., Anhui Huaren and Juneyao Airlines go up and down completely randomly.

Pair Corralation between Anhui Huaren and Juneyao Airlines

Assuming the 90 days trading horizon Anhui Huaren is expected to generate 1.31 times less return on investment than Juneyao Airlines. In addition to that, Anhui Huaren is 1.28 times more volatile than Juneyao Airlines. It trades about 0.12 of its total potential returns per unit of risk. Juneyao Airlines is currently generating about 0.21 per unit of volatility. If you would invest  993.00  in Juneyao Airlines on September 21, 2024 and sell it today you would earn a total of  434.00  from holding Juneyao Airlines or generate 43.71% return on investment over 90 days.

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

Anhui Huaren Health  vs.  Juneyao Airlines

Anhui Huaren Health

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Huaren Health are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Huaren sustained solid returns over the last few months and may actually be approaching a breakup point.

Juneyao Airlines

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Juneyao Airlines are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Juneyao Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Huaren and Juneyao Airlines

The main advantage of trading using opposite Anhui Huaren and Juneyao Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anhui Huaren 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 Anhui Huaren Health 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.