Correlation Between Hainan Airlines and Xizi Clean

Can any of the company-specific risk be diversified away by investing in both Hainan Airlines and Xizi Clean 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 Xizi Clean 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 Xizi Clean Energy, you can compare the effects of market volatilities on Hainan Airlines and Xizi Clean 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 Xizi Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Airlines and Xizi Clean.

Diversification Opportunities for Hainan Airlines and Xizi Clean

-0.18

Correlation Coefficient

Hainan Airlines  Xizi Clean

Good diversification

The 3 months correlation between Hainan and Xizi is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Xizi Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xizi Clean Energy 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 Xizi Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xizi Clean Energy has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Xizi Clean go up and down completely randomly.

Pair Corralation between Hainan Airlines and Xizi Clean

Assuming the 90 days trading horizon Hainan Airlines is expected to generate 1.84 times less return on investment than Xizi Clean. But when comparing it to its historical volatility, Hainan Airlines Co is 1.11 times less risky than Xizi Clean. It trades about 0.12 of its potential returns per unit of risk. Xizi Clean Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,101  in Xizi Clean Energy on October 22, 2024 and sell it today you would earn a total of  141.00  from holding Xizi Clean Energy or generate 12.81% return on investment over 90 days.

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

Hainan Airlines Co  vs.  Xizi Clean Energy

Hainan Airlines

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 15 (%) 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.

Xizi Clean Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xizi Clean Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xizi Clean may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hainan Airlines and Xizi Clean

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

The idea behind Hainan Airlines Co and Xizi Clean Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.