Correlation Between AIR CHINA and Wenzhou Kangning

Can any of the company-specific risk be diversified away by investing in both AIR CHINA and Wenzhou Kangning 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 AIR CHINA and Wenzhou Kangning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIR CHINA LTD and Wenzhou Kangning Hospital, you can compare the effects of market volatilities on AIR CHINA and Wenzhou Kangning 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 AIR CHINA with a short position of Wenzhou Kangning. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR CHINA and Wenzhou Kangning.

Diversification Opportunities for AIR CHINA and Wenzhou Kangning

0.06

Correlation Coefficient

AIR CHINA  Wenzhou Kangning

Significant diversification

The 3 months correlation between AIR and Wenzhou is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AIR CHINA LTD and Wenzhou Kangning Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wenzhou Kangning Hospital and AIR CHINA 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 AIR CHINA LTD are associated (or correlated) with Wenzhou Kangning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wenzhou Kangning Hospital has no effect on the direction of AIR CHINA i.e., AIR CHINA and Wenzhou Kangning go up and down completely randomly.

Pair Corralation between AIR CHINA and Wenzhou Kangning

Assuming the 90 days trading horizon AIR CHINA LTD is expected to generate 2.0 times more return on investment than Wenzhou Kangning. However, AIR CHINA is 2.0 times more volatile than Wenzhou Kangning Hospital. It trades about 0.18 of its potential returns per unit of risk. Wenzhou Kangning Hospital is currently generating about -0.13 per unit of risk. If you would invest  885.00  in AIR CHINA LTD on October 24, 2024 and sell it today you would earn a total of  315.00  from holding AIR CHINA LTD or generate 35.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

AIR CHINA LTD  vs.  Wenzhou Kangning Hospital

AIR CHINA LTD

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIR CHINA LTD are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AIR CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Wenzhou Kangning Hospital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wenzhou Kangning Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AIR CHINA and Wenzhou Kangning

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

The idea behind AIR CHINA LTD and Wenzhou Kangning Hospital 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.