Correlation Between Eastern Air and Qijing Machinery

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

Diversification Opportunities for Eastern Air and Qijing Machinery

0.25

Correlation Coefficient

Eastern Air  Qijing Machinery

Modest diversification

The 3 months correlation between Eastern and Qijing is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Air Logistics and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery 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 Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Eastern Air i.e., Eastern Air and Qijing Machinery go up and down completely randomly.

Pair Corralation between Eastern Air and Qijing Machinery

Assuming the 90 days trading horizon Eastern Air is expected to generate 1.28 times less return on investment than Qijing Machinery. But when comparing it to its historical volatility, Eastern Air Logistics is 1.16 times less risky than Qijing Machinery. It trades about 0.03 of its potential returns per unit of risk. Qijing Machinery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,094  in Qijing Machinery on October 3, 2024 and sell it today you would earn a total of  254.00  from holding Qijing Machinery or generate 23.22% return on investment over 90 days.

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

Eastern Air Logistics  vs.  Qijing Machinery

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 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.

Qijing Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Eastern Air and Qijing Machinery

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

The idea behind Eastern Air Logistics and Qijing Machinery 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.