Correlation Between Spring Airlines and Shenzhen Agricultural

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

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

Diversification Opportunities for Spring Airlines and Shenzhen Agricultural

0.42

Correlation Coefficient

Spring Airlines  Shenzhen Agricultural

Very weak diversification

The 3 months correlation between Spring and Shenzhen is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Spring Airlines Co and Shenzhen Agricultural Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Agricultural and Spring 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 Spring Airlines Co are associated (or correlated) with Shenzhen Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Agricultural has no effect on the direction of Spring Airlines i.e., Spring Airlines and Shenzhen Agricultural go up and down completely randomly.

Pair Corralation between Spring Airlines and Shenzhen Agricultural

Assuming the 90 days trading horizon Spring Airlines Co is expected to under-perform the Shenzhen Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, Spring Airlines Co is 1.21 times less risky than Shenzhen Agricultural. The stock trades about -0.08 of its potential returns per unit of risk. The Shenzhen Agricultural Products is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  664.00  in Shenzhen Agricultural Products on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Shenzhen Agricultural Products or generate 0.0% return on investment over 90 days.

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

Spring Airlines Co  vs.  Shenzhen Agricultural Products

Spring Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spring Airlines Co 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.

Shenzhen Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Agricultural Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spring Airlines and Shenzhen Agricultural

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

The idea behind Spring Airlines Co and Shenzhen Agricultural Products 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.