Correlation Between Spring Airlines and Dongjiang Environmental

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

Diversification Opportunities for Spring Airlines and Dongjiang Environmental

0.69

Correlation Coefficient

Spring Airlines  Dongjiang Environmental

Poor diversification

The 3 months correlation between Spring and Dongjiang is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Spring Airlines Co and Dongjiang Environmental Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongjiang Environmental 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 Dongjiang Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongjiang Environmental has no effect on the direction of Spring Airlines i.e., Spring Airlines and Dongjiang Environmental go up and down completely randomly.

Pair Corralation between Spring Airlines and Dongjiang Environmental

Assuming the 90 days trading horizon Spring Airlines Co is expected to under-perform the Dongjiang Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Spring Airlines Co is 1.25 times less risky than Dongjiang Environmental. The stock trades about -0.03 of its potential returns per unit of risk. The Dongjiang Environmental Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  387.00  in Dongjiang Environmental Co on December 11, 2024 and sell it today you would earn a total of  60.00  from holding Dongjiang Environmental Co or generate 15.5% return on investment over 90 days.

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

Spring Airlines Co  vs.  Dongjiang Environmental Co

Spring Airlines

Risk-Adjusted Performance

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.

Dongjiang Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dongjiang Environmental 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.

Pair Trading with Spring Airlines and Dongjiang Environmental

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

The idea behind Spring Airlines Co and Dongjiang Environmental 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.