Correlation Between Hainan Airlines and Qijing Machinery

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

Diversification Opportunities for Hainan Airlines and Qijing Machinery

-0.46

Correlation Coefficient

Hainan Airlines  Qijing Machinery

Very good diversification

The 3 months correlation between Hainan and Qijing is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Airlines Co and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery 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 Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Hainan Airlines i.e., Hainan Airlines and Qijing Machinery go up and down completely randomly.

Pair Corralation between Hainan Airlines and Qijing Machinery

Assuming the 90 days trading horizon Hainan Airlines Co is expected to under-perform the Qijing Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Hainan Airlines Co is 1.52 times less risky than Qijing Machinery. The stock trades about -0.09 of its potential returns per unit of risk. The Qijing Machinery is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,257  in Qijing Machinery on December 26, 2024 and sell it today you would earn a total of  1,004  from holding Qijing Machinery or generate 79.87% return on investment over 90 days.

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

Hainan Airlines Co  vs.  Qijing Machinery

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.

Qijing Machinery

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Airlines and Qijing Machinery

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

The idea behind Hainan Airlines Co and Qijing Machinery 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.