Correlation Between Air China and Harbin Hatou

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

By analyzing existing cross correlation between Air China Ltd and Harbin Hatou Investment, you can compare the effects of market volatilities on Air China and Harbin Hatou 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 Air China with a short position of Harbin Hatou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Harbin Hatou.

Diversification Opportunities for Air China and Harbin Hatou

0.57

Correlation Coefficient

Air China  Harbin Hatou

Very weak diversification

The 3 months correlation between Air and Harbin is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and Harbin Hatou Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbin Hatou Investment and Air China 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 Air China Ltd are associated (or correlated) with Harbin Hatou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbin Hatou Investment has no effect on the direction of Air China i.e., Air China and Harbin Hatou go up and down completely randomly.

Pair Corralation between Air China and Harbin Hatou

Assuming the 90 days trading horizon Air China Ltd is expected to generate 0.9 times more return on investment than Harbin Hatou. However, Air China Ltd is 1.11 times less risky than Harbin Hatou. It trades about -0.08 of its potential returns per unit of risk. Harbin Hatou Investment is currently generating about -0.15 per unit of risk. If you would invest  805.00  in Air China Ltd on December 29, 2024 and sell it today you would lose (75.00) from holding Air China Ltd or give up 9.32% of portfolio value over 90 days.

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

Air China Ltd  vs.  Harbin Hatou Investment

Air China

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air China Ltd 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.

Harbin Hatou Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harbin Hatou Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Air China and Harbin Hatou

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

The idea behind Air China Ltd and Harbin Hatou Investment 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.