Correlation Between Industrial and Hainan Airlines

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

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

Diversification Opportunities for Industrial and Hainan Airlines

-0.41

Correlation Coefficient

Industrial  Hainan Airlines

Very good diversification

The 3 months correlation between Industrial and Hainan is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Hainan Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Airlines and Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and Hainan Airlines go up and down completely randomly.

Pair Corralation between Industrial and Hainan Airlines

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.35 times more return on investment than Hainan Airlines. However, Industrial and Commercial is 2.84 times less risky than Hainan Airlines. It trades about -0.01 of its potential returns per unit of risk. Hainan Airlines Co is currently generating about -0.11 per unit of risk. If you would invest  695.00  in Industrial and Commercial on December 29, 2024 and sell it today you would lose (7.00) from holding Industrial and Commercial or give up 1.01% of portfolio value over 90 days.

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

Industrial and Commercial  vs.  Hainan Airlines Co

Industrial and Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial and Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hainan Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Airlines Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial and Hainan Airlines

The main advantage of trading using opposite Industrial and Hainan Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.