Correlation Between China National and Juneyao Airlines

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

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

Diversification Opportunities for China National and Juneyao Airlines

0.56

Correlation Coefficient

China National  Juneyao Airlines

Very weak diversification

The 3 months correlation between China and Juneyao is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding China National Software and Juneyao Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juneyao Airlines and China National 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 China National Software are associated (or correlated) with Juneyao Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juneyao Airlines has no effect on the direction of China National i.e., China National and Juneyao Airlines go up and down completely randomly.

Pair Corralation between China National and Juneyao Airlines

Assuming the 90 days trading horizon China National Software is expected to under-perform the Juneyao Airlines. In addition to that, China National is 1.28 times more volatile than Juneyao Airlines. It trades about -0.49 of its total potential returns per unit of risk. Juneyao Airlines is currently generating about -0.36 per unit of volatility. If you would invest  1,501  in Juneyao Airlines on October 11, 2024 and sell it today you would lose (218.00) from holding Juneyao Airlines or give up 14.52% of portfolio value over 90 days.

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

China National Software  vs.  Juneyao Airlines

China National Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China National Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Juneyao Airlines

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Juneyao Airlines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Juneyao Airlines may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China National and Juneyao Airlines

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

The idea behind China National Software and Juneyao 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.