Correlation Between Harbin Air and Juneyao Airlines

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

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

Diversification Opportunities for Harbin Air and Juneyao Airlines

0.95

Correlation Coefficient

Harbin Air  Juneyao Airlines

Almost no diversification

The 3 months correlation between Harbin and Juneyao is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Harbin Air Conditioning and Juneyao Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juneyao Airlines and Harbin Air 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 Harbin Air Conditioning 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 Harbin Air i.e., Harbin Air and Juneyao Airlines go up and down completely randomly.

Pair Corralation between Harbin Air and Juneyao Airlines

Assuming the 90 days trading horizon Harbin Air Conditioning is expected to generate 1.25 times more return on investment than Juneyao Airlines. However, Harbin Air is 1.25 times more volatile than Juneyao Airlines. It trades about 0.01 of its potential returns per unit of risk. Juneyao Airlines is currently generating about 0.0 per unit of risk. If you would invest  494.00  in Harbin Air Conditioning on September 19, 2024 and sell it today you would earn a total of  6.00  from holding Harbin Air Conditioning or generate 1.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

Harbin Air Conditioning  vs.  Juneyao Airlines

Harbin Air Conditioning

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Air Conditioning are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harbin Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Juneyao Airlines

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Juneyao Airlines are ranked lower than 15 (%) 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 Harbin Air and Juneyao Airlines

The main advantage of trading using opposite Harbin Air and Juneyao Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harbin Air 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 Harbin Air Conditioning 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.