Correlation Between Hainan Airlines and Huasi Agricultural

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

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

Diversification Opportunities for Hainan Airlines and Huasi Agricultural

-0.48

Correlation Coefficient

Hainan Airlines  Huasi Agricultural

Very good diversification

The 3 months correlation between Hainan and Huasi is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Huasi Agricultural Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huasi Agricultural and Hainan Airlines 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 Airlines Co are associated (or correlated) with Huasi Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huasi Agricultural has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Huasi Agricultural go up and down completely randomly.

Pair Corralation between Hainan Airlines and Huasi Agricultural

Assuming the 90 days trading horizon Hainan Airlines Co is expected to under-perform the Huasi Agricultural. In addition to that, Hainan Airlines is 1.48 times more volatile than Huasi Agricultural Development. It trades about -0.07 of its total potential returns per unit of risk. Huasi Agricultural Development is currently generating about 0.07 per unit of volatility. If you would invest  388.00  in Huasi Agricultural Development on December 25, 2024 and sell it today you would earn a total of  31.00  from holding Huasi Agricultural Development or generate 7.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Hainan Airlines Co  vs.  Huasi Agricultural Development

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.

Huasi Agricultural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huasi Agricultural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hainan Airlines and Huasi Agricultural

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

The idea behind Hainan Airlines Co and Huasi Agricultural Development 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.