Correlation Between Shanghai Sanyou and Hainan Airlines

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

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

Diversification Opportunities for Shanghai Sanyou and Hainan Airlines

0.43

Correlation Coefficient

Shanghai Sanyou  Hainan Airlines

Very weak diversification

The 3 months correlation between Shanghai and Hainan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Hainan Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Airlines and Shanghai Sanyou 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 Shanghai Sanyou Medical 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 Shanghai Sanyou i.e., Shanghai Sanyou and Hainan Airlines go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Hainan Airlines

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to under-perform the Hainan Airlines. In addition to that, Shanghai Sanyou is 1.3 times more volatile than Hainan Airlines Co. It trades about -0.01 of its total potential returns per unit of risk. Hainan Airlines Co is currently generating about 0.0 per unit of volatility. If you would invest  182.00  in Hainan Airlines Co on October 23, 2024 and sell it today you would lose (18.00) from holding Hainan Airlines Co or give up 9.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Shanghai Sanyou Medical  vs.  Hainan Airlines Co

Shanghai Sanyou Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Sanyou Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Sanyou 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 11 (%) 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 Shanghai Sanyou and Hainan Airlines

The main advantage of trading using opposite Shanghai Sanyou and Hainan Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Sanyou 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 Shanghai Sanyou Medical 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.