Correlation Between Hainan Airlines and Shijiazhuang Tonhe

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

Diversification Opportunities for Hainan Airlines and Shijiazhuang Tonhe

0.65

Correlation Coefficient

Hainan Airlines  Shijiazhuang Tonhe

Poor diversification

The 3 months correlation between Hainan and Shijiazhuang is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Shijiazhuang Tonhe Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shijiazhuang Tonhe 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 Shijiazhuang Tonhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shijiazhuang Tonhe has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Shijiazhuang Tonhe go up and down completely randomly.

Pair Corralation between Hainan Airlines and Shijiazhuang Tonhe

Assuming the 90 days trading horizon Hainan Airlines is expected to generate 5.1 times less return on investment than Shijiazhuang Tonhe. In addition to that, Hainan Airlines is 1.21 times more volatile than Shijiazhuang Tonhe Electronics. It trades about 0.04 of its total potential returns per unit of risk. Shijiazhuang Tonhe Electronics is currently generating about 0.24 per unit of volatility. If you would invest  1,654  in Shijiazhuang Tonhe Electronics on September 21, 2024 and sell it today you would earn a total of  232.00  from holding Shijiazhuang Tonhe Electronics or generate 14.03% 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.  Shijiazhuang Tonhe Electronics

Hainan Airlines

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 18 (%) 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.

Shijiazhuang Tonhe

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shijiazhuang Tonhe Electronics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shijiazhuang Tonhe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Airlines and Shijiazhuang Tonhe

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

The idea behind Hainan Airlines Co and Shijiazhuang Tonhe Electronics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.