Correlation Between Air China and Ping An

Can any of the company-specific risk be diversified away by investing in both Air China and Ping An 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 Ping An 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 Ping An Insurance, you can compare the effects of market volatilities on Air China and Ping An 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 Ping An. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Ping An.

Diversification Opportunities for Air China and Ping An

0.47

Correlation Coefficient

Air China  Ping An

Very weak diversification

The 3 months correlation between Air and Ping is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of Air China i.e., Air China and Ping An go up and down completely randomly.

Pair Corralation between Air China and Ping An

Assuming the 90 days trading horizon Air China Ltd is expected to under-perform the Ping An. But the stock apears to be less risky and, when comparing its historical volatility, Air China Ltd is 1.01 times less risky than Ping An. The stock trades about -0.02 of its potential returns per unit of risk. The Ping An Insurance is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,558  in Ping An Insurance on September 20, 2024 and sell it today you would earn a total of  736.00  from holding Ping An Insurance or generate 16.15% return on investment over 90 days.

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

Air China Ltd  vs.  Ping An Insurance

Air China

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Ltd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air China sustained solid returns over the last few months and may actually be approaching a breakup point.

Ping An Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air China and Ping An

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

The idea behind Air China Ltd and Ping An Insurance 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.