Correlation Between Hainan Airlines and Shenzhen Noposion

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

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

Diversification Opportunities for Hainan Airlines and Shenzhen Noposion

0.59

Correlation Coefficient

Hainan Airlines  Shenzhen Noposion

Very weak diversification

The 3 months correlation between Hainan and Shenzhen is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Shenzhen Noposion Agrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Noposion and Hainan Airlines 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 Hainan Airlines Co are associated (or correlated) with Shenzhen Noposion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Noposion has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Shenzhen Noposion go up and down completely randomly.

Pair Corralation between Hainan Airlines and Shenzhen Noposion

Assuming the 90 days trading horizon Hainan Airlines Co is expected to generate 1.07 times more return on investment than Shenzhen Noposion. However, Hainan Airlines is 1.07 times more volatile than Shenzhen Noposion Agrochemicals. It trades about -0.05 of its potential returns per unit of risk. Shenzhen Noposion Agrochemicals is currently generating about -0.33 per unit of risk. If you would invest  156.00  in Hainan Airlines Co on December 4, 2024 and sell it today you would lose (3.00) from holding Hainan Airlines Co or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Hainan Airlines Co  vs.  Shenzhen Noposion Agrochemical

Hainan Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Airlines Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shenzhen Noposion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Noposion Agrochemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hainan Airlines and Shenzhen Noposion

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

The idea behind Hainan Airlines Co and Shenzhen Noposion Agrochemicals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.