Correlation Between Hainan Airlines and Shuhua Sports

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

Diversification Opportunities for Hainan Airlines and Shuhua Sports

0.77

Correlation Coefficient

Hainan Airlines  Shuhua Sports

Poor diversification

The 3 months correlation between Hainan and Shuhua is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Shuhua Sports Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shuhua Sports 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 Shuhua Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shuhua Sports has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Shuhua Sports go up and down completely randomly.

Pair Corralation between Hainan Airlines and Shuhua Sports

Assuming the 90 days trading horizon Hainan Airlines Co is expected to generate 0.84 times more return on investment than Shuhua Sports. However, Hainan Airlines Co is 1.19 times less risky than Shuhua Sports. It trades about 0.01 of its potential returns per unit of risk. Shuhua Sports Co is currently generating about -0.01 per unit of risk. If you would invest  187.00  in Hainan Airlines Co on September 26, 2024 and sell it today you would lose (9.00) from holding Hainan Airlines Co or give up 4.81% of portfolio value over 90 days.

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

Hainan Airlines Co  vs.  Shuhua Sports Co

Hainan Airlines

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 14 (%) 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.

Shuhua Sports

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shuhua Sports Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shuhua Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Airlines and Shuhua Sports

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

The idea behind Hainan Airlines Co and Shuhua Sports Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.