Correlation Between China Eastern and Shanghai Sanyou

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

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

Diversification Opportunities for China Eastern and Shanghai Sanyou

0.57

Correlation Coefficient

China Eastern  Shanghai Sanyou

Very weak diversification

The 3 months correlation between China and Shanghai is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines and Shanghai Sanyou Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Sanyou Medical and China Eastern 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 China Eastern Airlines are associated (or correlated) with Shanghai Sanyou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Sanyou Medical has no effect on the direction of China Eastern i.e., China Eastern and Shanghai Sanyou go up and down completely randomly.

Pair Corralation between China Eastern and Shanghai Sanyou

Assuming the 90 days trading horizon China Eastern Airlines is expected to generate 0.4 times more return on investment than Shanghai Sanyou. However, China Eastern Airlines is 2.48 times less risky than Shanghai Sanyou. It trades about -0.54 of its potential returns per unit of risk. Shanghai Sanyou Medical is currently generating about -0.27 per unit of risk. If you would invest  433.00  in China Eastern Airlines on October 11, 2024 and sell it today you would lose (59.00) from holding China Eastern Airlines or give up 13.63% of portfolio value over 90 days.

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

China Eastern Airlines  vs.  Shanghai Sanyou Medical

China Eastern Airlines

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Eastern Airlines are ranked lower than 1 (%) 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.

Shanghai Sanyou Medical

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Sanyou Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Sanyou is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Eastern and Shanghai Sanyou

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

The idea behind China Eastern Airlines and Shanghai Sanyou Medical 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.