Correlation Between Spring Airlines and Hubei Xingfa

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

Diversification Opportunities for Spring Airlines and Hubei Xingfa

0.04

Correlation Coefficient

Spring Airlines  Hubei Xingfa

Significant diversification

The 3 months correlation between Spring and Hubei is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Spring Airlines Co and Hubei Xingfa Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Xingfa Chemicals 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 Hubei Xingfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Xingfa Chemicals has no effect on the direction of Spring Airlines i.e., Spring Airlines and Hubei Xingfa go up and down completely randomly.

Pair Corralation between Spring Airlines and Hubei Xingfa

Assuming the 90 days trading horizon Spring Airlines Co is expected to under-perform the Hubei Xingfa. In addition to that, Spring Airlines is 1.04 times more volatile than Hubei Xingfa Chemicals. It trades about -0.08 of its total potential returns per unit of risk. Hubei Xingfa Chemicals is currently generating about 0.06 per unit of volatility. If you would invest  2,196  in Hubei Xingfa Chemicals on December 25, 2024 and sell it today you would earn a total of  108.00  from holding Hubei Xingfa Chemicals or generate 4.92% return on investment over 90 days.

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

Spring Airlines Co  vs.  Hubei Xingfa Chemicals

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.

Hubei Xingfa Chemicals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Xingfa Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hubei Xingfa 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 Hubei Xingfa

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

The idea behind Spring Airlines Co and Hubei Xingfa Chemicals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.