Correlation Between Hainan Airlines and Gan Yuan

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

Diversification Opportunities for Hainan Airlines and Gan Yuan

0.67

Correlation Coefficient

Hainan Airlines  Gan Yuan

Poor diversification

The 3 months correlation between Hainan and Gan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Gan Yuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gan Yuan Foods 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 Gan Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gan Yuan Foods has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Gan Yuan go up and down completely randomly.

Pair Corralation between Hainan Airlines and Gan Yuan

Assuming the 90 days trading horizon Hainan Airlines Co is expected to generate 1.72 times more return on investment than Gan Yuan. However, Hainan Airlines is 1.72 times more volatile than Gan Yuan Foods. It trades about 0.13 of its potential returns per unit of risk. Gan Yuan Foods is currently generating about 0.21 per unit of risk. If you would invest  119.00  in Hainan Airlines Co on October 9, 2024 and sell it today you would earn a total of  41.00  from holding Hainan Airlines Co or generate 34.45% return on investment over 90 days.

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

Hainan Airlines Co  vs.  Gan Yuan Foods

Hainan Airlines

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Gan Yuan Foods

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Hainan Airlines and Gan Yuan

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

The idea behind Hainan Airlines Co and Gan Yuan Foods 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.