Correlation Between Xinjiang Baodi and Juneyao Airlines

Can any of the company-specific risk be diversified away by investing in both Xinjiang Baodi and Juneyao Airlines 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 Xinjiang Baodi and Juneyao Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xinjiang Baodi Mining and Juneyao Airlines, you can compare the effects of market volatilities on Xinjiang Baodi and Juneyao Airlines 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 Xinjiang Baodi with a short position of Juneyao Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Baodi and Juneyao Airlines.

Diversification Opportunities for Xinjiang Baodi and Juneyao Airlines

0.64

Correlation Coefficient

Xinjiang Baodi  Juneyao Airlines

Poor diversification

The 3 months correlation between Xinjiang and Juneyao is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Juneyao Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juneyao Airlines and Xinjiang Baodi 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 Xinjiang Baodi Mining are associated (or correlated) with Juneyao Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juneyao Airlines has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Juneyao Airlines go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Juneyao Airlines

Assuming the 90 days trading horizon Xinjiang Baodi is expected to generate 2.25 times less return on investment than Juneyao Airlines. In addition to that, Xinjiang Baodi is 1.22 times more volatile than Juneyao Airlines. It trades about 0.02 of its total potential returns per unit of risk. Juneyao Airlines is currently generating about 0.04 per unit of volatility. If you would invest  1,291  in Juneyao Airlines on October 25, 2024 and sell it today you would earn a total of  59.00  from holding Juneyao Airlines or generate 4.57% return on investment over 90 days.

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

Xinjiang Baodi Mining  vs.  Juneyao Airlines

Xinjiang Baodi Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xinjiang Baodi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Juneyao Airlines

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Juneyao Airlines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Juneyao Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xinjiang Baodi and Juneyao Airlines

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

The idea behind Xinjiang Baodi Mining and Juneyao Airlines 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.