Correlation Between Ping An and Hainan Airlines

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

By analyzing existing cross correlation between Ping An Insurance and Hainan Airlines Co, you can compare the effects of market volatilities on Ping An and Hainan 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 Ping An with a short position of Hainan Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Hainan Airlines.

Diversification Opportunities for Ping An and Hainan Airlines

-0.52

Correlation Coefficient

Ping An  Hainan Airlines

Excellent diversification

The 3 months correlation between Ping and Hainan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Hainan Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Airlines and Ping An 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 Ping An Insurance are associated (or correlated) with Hainan Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Airlines has no effect on the direction of Ping An i.e., Ping An and Hainan Airlines go up and down completely randomly.

Pair Corralation between Ping An and Hainan Airlines

Assuming the 90 days trading horizon Ping An Insurance is expected to under-perform the Hainan Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 2.24 times less risky than Hainan Airlines. The stock trades about -0.15 of its potential returns per unit of risk. The Hainan Airlines Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Hainan Airlines Co on October 25, 2024 and sell it today you would earn a total of  9.00  from holding Hainan Airlines Co or generate 39.13% return on investment over 90 days.

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

Ping An Insurance  vs.  Hainan Airlines Co

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hainan Airlines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Hainan Airlines

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

The idea behind Ping An Insurance and Hainan Airlines Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.