Correlation Between Eastern Air and Ningbo Homelink

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

Diversification Opportunities for Eastern Air and Ningbo Homelink

-0.26

Correlation Coefficient

Eastern Air  Ningbo Homelink

Very good diversification

The 3 months correlation between Eastern and Ningbo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Air Logistics and Ningbo Homelink Eco iTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Homelink Eco 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 Ningbo Homelink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Homelink Eco has no effect on the direction of Eastern Air i.e., Eastern Air and Ningbo Homelink go up and down completely randomly.

Pair Corralation between Eastern Air and Ningbo Homelink

Assuming the 90 days trading horizon Eastern Air Logistics is expected to under-perform the Ningbo Homelink. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Air Logistics is 1.32 times less risky than Ningbo Homelink. The stock trades about -0.08 of its potential returns per unit of risk. The Ningbo Homelink Eco iTech is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,745  in Ningbo Homelink Eco iTech on December 2, 2024 and sell it today you would earn a total of  18.00  from holding Ningbo Homelink Eco iTech or generate 1.03% return on investment over 90 days.

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

Eastern Air Logistics  vs.  Ningbo Homelink Eco iTech

Eastern Air Logistics

Risk-Adjusted Performance

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.

Ningbo Homelink Eco

Risk-Adjusted Performance

Weak

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

Pair Trading with Eastern Air and Ningbo Homelink

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

The idea behind Eastern Air Logistics and Ningbo Homelink Eco iTech 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.