Correlation Between Eastern Air and Shenzhen Hifuture

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

Diversification Opportunities for Eastern Air and Shenzhen Hifuture

0.01

Correlation Coefficient

Eastern Air  Shenzhen Hifuture

Significant diversification

The 3 months correlation between Eastern and Shenzhen is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Air Logistics and Shenzhen Hifuture Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Hifuture 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 Shenzhen Hifuture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Hifuture has no effect on the direction of Eastern Air i.e., Eastern Air and Shenzhen Hifuture go up and down completely randomly.

Pair Corralation between Eastern Air and Shenzhen Hifuture

Assuming the 90 days trading horizon Eastern Air Logistics is expected to under-perform the Shenzhen Hifuture. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Air Logistics is 1.57 times less risky than Shenzhen Hifuture. The stock trades about -0.06 of its potential returns per unit of risk. The Shenzhen Hifuture Electric is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  229.00  in Shenzhen Hifuture Electric on September 28, 2024 and sell it today you would earn a total of  56.00  from holding Shenzhen Hifuture Electric or generate 24.45% return on investment over 90 days.

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

Eastern Air Logistics  vs.  Shenzhen Hifuture Electric

Eastern Air Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Air Logistics 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.

Shenzhen Hifuture

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Hifuture Electric are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Hifuture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern Air and Shenzhen Hifuture

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

The idea behind Eastern Air Logistics and Shenzhen Hifuture Electric 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.