Correlation Between Hainan Airlines and Chahua Modern

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

Diversification Opportunities for Hainan Airlines and Chahua Modern

-0.6

Correlation Coefficient

Hainan Airlines  Chahua Modern

Excellent diversification

The 3 months correlation between Hainan and Chahua is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Chahua Modern Housewares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chahua Modern Housewares 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 Chahua Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chahua Modern Housewares has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Chahua Modern go up and down completely randomly.

Pair Corralation between Hainan Airlines and Chahua Modern

Assuming the 90 days trading horizon Hainan Airlines Co is expected to under-perform the Chahua Modern. But the stock apears to be less risky and, when comparing its historical volatility, Hainan Airlines Co is 1.71 times less risky than Chahua Modern. The stock trades about -0.17 of its potential returns per unit of risk. The Chahua Modern Housewares is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,246  in Chahua Modern Housewares on December 30, 2024 and sell it today you would earn a total of  232.00  from holding Chahua Modern Housewares or generate 10.33% return on investment over 90 days.

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

Hainan Airlines Co  vs.  Chahua Modern Housewares

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.

Chahua Modern Housewares

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Airlines and Chahua Modern

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

The idea behind Hainan Airlines Co and Chahua Modern Housewares 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.