Correlation Between Air China and Ming Yang

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

Diversification Opportunities for Air China and Ming Yang

0.71

Correlation Coefficient

Air China  Ming Yang

Poor diversification

The 3 months correlation between Air and Ming is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and Ming Yang Smart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ming Yang Smart 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 Ming Yang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ming Yang Smart has no effect on the direction of Air China i.e., Air China and Ming Yang go up and down completely randomly.

Pair Corralation between Air China and Ming Yang

Assuming the 90 days trading horizon Air China Ltd is expected to generate 0.86 times more return on investment than Ming Yang. However, Air China Ltd is 1.17 times less risky than Ming Yang. It trades about -0.14 of its potential returns per unit of risk. Ming Yang Smart is currently generating about -0.26 per unit of risk. If you would invest  813.00  in Air China Ltd on October 23, 2024 and sell it today you would lose (53.00) from holding Air China Ltd or give up 6.52% of portfolio value over 90 days.

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

Air China Ltd  vs.  Ming Yang Smart

Air China

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air China may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ming Yang Smart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ming Yang Smart 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 Air China and Ming Yang

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

The idea behind Air China Ltd and Ming Yang Smart 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.