Correlation Between Hainan Airlines and Beijing Venustech

Can any of the company-specific risk be diversified away by investing in both Hainan Airlines and Beijing Venustech 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 Beijing Venustech 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 Beijing Venustech, you can compare the effects of market volatilities on Hainan Airlines and Beijing Venustech 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 Beijing Venustech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Airlines and Beijing Venustech.

Diversification Opportunities for Hainan Airlines and Beijing Venustech

-0.02

Correlation Coefficient

Hainan Airlines  Beijing Venustech

Good diversification

The 3 months correlation between Hainan and Beijing is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Beijing Venustech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Venustech 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 Beijing Venustech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Venustech has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Beijing Venustech go up and down completely randomly.

Pair Corralation between Hainan Airlines and Beijing Venustech

Assuming the 90 days trading horizon Hainan Airlines Co is expected to under-perform the Beijing Venustech. But the stock apears to be less risky and, when comparing its historical volatility, Hainan Airlines Co is 1.59 times less risky than Beijing Venustech. The stock trades about -0.18 of its potential returns per unit of risk. The Beijing Venustech is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,717  in Beijing Venustech on December 5, 2024 and sell it today you would earn a total of  128.00  from holding Beijing Venustech or generate 7.45% return on investment over 90 days.

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

Hainan Airlines Co  vs.  Beijing Venustech

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.

Beijing Venustech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Venustech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Venustech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hainan Airlines and Beijing Venustech

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

The idea behind Hainan Airlines Co and Beijing Venustech 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.