Correlation Between Eastern Air and Changchun High

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

By analyzing existing cross correlation between Eastern Air Logistics and Changchun High New, you can compare the effects of market volatilities on Eastern Air and Changchun High 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 Eastern Air with a short position of Changchun High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Air and Changchun High.

Diversification Opportunities for Eastern Air and Changchun High

0.81

Correlation Coefficient

Eastern Air  Changchun High

Very poor diversification

The 3 months correlation between Eastern and Changchun is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Air Logistics and Changchun High New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun High New and Eastern Air 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 Eastern Air Logistics are associated (or correlated) with Changchun High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun High New has no effect on the direction of Eastern Air i.e., Eastern Air and Changchun High go up and down completely randomly.

Pair Corralation between Eastern Air and Changchun High

Assuming the 90 days trading horizon Eastern Air is expected to generate 7.67 times less return on investment than Changchun High. But when comparing it to its historical volatility, Eastern Air Logistics is 1.32 times less risky than Changchun High. It trades about 0.03 of its potential returns per unit of risk. Changchun High New is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,940  in Changchun High New on September 2, 2024 and sell it today you would earn a total of  2,782  from holding Changchun High New or generate 35.04% return on investment over 90 days.

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

Eastern Air Logistics  vs.  Changchun High New

Eastern Air Logistics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Air Logistics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Eastern Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Changchun High New

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun High New are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun High sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern Air and Changchun High

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

The idea behind Eastern Air Logistics and Changchun High New 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.