Correlation Between Hainan Mining and Juneyao Airlines

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

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

Diversification Opportunities for Hainan Mining and Juneyao Airlines

0.71

Correlation Coefficient

Hainan Mining  Juneyao Airlines

Poor diversification

The 3 months correlation between Hainan and Juneyao is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Juneyao Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juneyao Airlines and Hainan Mining 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 Hainan Mining Co are associated (or correlated) with Juneyao Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juneyao Airlines has no effect on the direction of Hainan Mining i.e., Hainan Mining and Juneyao Airlines go up and down completely randomly.

Pair Corralation between Hainan Mining and Juneyao Airlines

Assuming the 90 days trading horizon Hainan Mining Co is expected to generate 0.77 times more return on investment than Juneyao Airlines. However, Hainan Mining Co is 1.3 times less risky than Juneyao Airlines. It trades about 0.02 of its potential returns per unit of risk. Juneyao Airlines is currently generating about -0.06 per unit of risk. If you would invest  733.00  in Hainan Mining Co on December 25, 2024 and sell it today you would earn a total of  9.00  from holding Hainan Mining Co or generate 1.23% return on investment over 90 days.

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

Hainan Mining Co  vs.  Juneyao Airlines

Hainan Mining

Risk-Adjusted Performance

Weak

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

Juneyao Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Juneyao Airlines 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.

Pair Trading with Hainan Mining and Juneyao Airlines

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

The idea behind Hainan Mining Co and Juneyao Airlines 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 Transaction History module to view history of all your transactions and understand their impact on performance.