Correlation Between Sinomach Automobile and China Eastern

Can any of the company-specific risk be diversified away by investing in both Sinomach Automobile and China Eastern 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 Sinomach Automobile and China Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinomach Automobile Co and China Eastern Airlines, you can compare the effects of market volatilities on Sinomach Automobile and China Eastern 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 Sinomach Automobile with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinomach Automobile and China Eastern.

Diversification Opportunities for Sinomach Automobile and China Eastern

0.14

Correlation Coefficient

Sinomach Automobile  China Eastern

Average diversification

The 3 months correlation between Sinomach and China is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sinomach Automobile Co and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines and Sinomach Automobile 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 Sinomach Automobile Co are associated (or correlated) with China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of Sinomach Automobile i.e., Sinomach Automobile and China Eastern go up and down completely randomly.

Pair Corralation between Sinomach Automobile and China Eastern

Assuming the 90 days trading horizon Sinomach Automobile Co is expected to generate 0.97 times more return on investment than China Eastern. However, Sinomach Automobile Co is 1.03 times less risky than China Eastern. It trades about 0.04 of its potential returns per unit of risk. China Eastern Airlines is currently generating about -0.07 per unit of risk. If you would invest  650.00  in Sinomach Automobile Co on December 25, 2024 and sell it today you would earn a total of  18.00  from holding Sinomach Automobile Co or generate 2.77% return on investment over 90 days.

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

Sinomach Automobile Co  vs.  China Eastern Airlines

Sinomach Automobile

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach Automobile Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinomach Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Eastern Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Eastern Airlines 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 Sinomach Automobile and China Eastern

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

The idea behind Sinomach Automobile Co and China Eastern Airlines 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 CEOs Directory module to screen CEOs from public companies around the world.