Correlation Between China Mobile and Hainan Airlines

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Can any of the company-specific risk be diversified away by investing in both China Mobile and Hainan 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 Mobile and Hainan Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Mobile Limited and Hainan Airlines Co, you can compare the effects of market volatilities on China Mobile and Hainan 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 Mobile with a short position of Hainan Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mobile and Hainan Airlines.

Diversification Opportunities for China Mobile and Hainan Airlines

ChinaHainanDiversified AwayChinaHainanDiversified Away100%
0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between China and Hainan is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Hainan Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Airlines and China Mobile 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 Mobile Limited are associated (or correlated) with Hainan Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Airlines has no effect on the direction of China Mobile i.e., China Mobile and Hainan Airlines go up and down completely randomly.

Pair Corralation between China Mobile and Hainan Airlines

Assuming the 90 days trading horizon China Mobile is expected to generate 2.66 times less return on investment than Hainan Airlines. But when comparing it to its historical volatility, China Mobile Limited is 3.39 times less risky than Hainan Airlines. It trades about 0.11 of its potential returns per unit of risk. Hainan Airlines Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Hainan Airlines Co on October 31, 2024 and sell it today you would earn a total of  25.00  from holding Hainan Airlines Co or generate 18.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

China Mobile Limited  vs.  Hainan Airlines Co

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 020406080
JavaScript chart by amCharts 3.21.15600941 600221
       Timeline  
China Mobile Limited 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Mobile may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanJan100105110115120
Hainan Airlines 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 6 (%) 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.
JavaScript chart by amCharts 3.21.15DecJanJan1.41.61.822.22.4

China Mobile and Hainan Airlines Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.73-2.79-1.86-0.920.01560.981.972.963.95 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15600941 600221
       Returns  

Pair Trading with China Mobile and Hainan Airlines

The main advantage of trading using opposite China Mobile and Hainan Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mobile position performs unexpectedly, Hainan 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 Hainan Airlines will offset losses from the drop in Hainan Airlines' long position.
The idea behind China Mobile Limited and Hainan Airlines 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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