Correlation Between Hainan Airlines and Hithink RoyalFlush

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

Diversification Opportunities for Hainan Airlines and Hithink RoyalFlush

0.43

Correlation Coefficient

Hainan Airlines  Hithink RoyalFlush

Very weak diversification

The 3 months correlation between Hainan and Hithink is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Hithink RoyalFlush Info in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hithink RoyalFlush Info 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 Hithink RoyalFlush. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hithink RoyalFlush Info has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Hithink RoyalFlush go up and down completely randomly.

Pair Corralation between Hainan Airlines and Hithink RoyalFlush

Assuming the 90 days trading horizon Hainan Airlines Co is expected to under-perform the Hithink RoyalFlush. But the stock apears to be less risky and, when comparing its historical volatility, Hainan Airlines Co is 1.71 times less risky than Hithink RoyalFlush. The stock trades about -0.15 of its potential returns per unit of risk. The Hithink RoyalFlush Info is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  33,131  in Hithink RoyalFlush Info on December 4, 2024 and sell it today you would lose (3,767) from holding Hithink RoyalFlush Info or give up 11.37% of portfolio value over 90 days.

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

Hainan Airlines Co  vs.  Hithink RoyalFlush Info

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.

Hithink RoyalFlush Info

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hithink RoyalFlush Info 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 Hithink RoyalFlush

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

The idea behind Hainan Airlines Co and Hithink RoyalFlush Info 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.