Correlation Between AIR PRODCHEMICALS and China Eastern

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

By analyzing existing cross correlation between AIR PRODCHEMICALS and China Eastern Airlines, you can compare the effects of market volatilities on AIR PRODCHEMICALS and China Eastern 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 PRODCHEMICALS with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and China Eastern.

Diversification Opportunities for AIR PRODCHEMICALS and China Eastern

0.06

Correlation Coefficient

AIR PRODCHEMICALS  China Eastern

Significant diversification

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

Pair Corralation between AIR PRODCHEMICALS and China Eastern

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.41 times more return on investment than China Eastern. However, AIR PRODCHEMICALS is 2.44 times less risky than China Eastern. It trades about 0.02 of its potential returns per unit of risk. China Eastern Airlines is currently generating about 0.01 per unit of risk. If you would invest  24,778  in AIR PRODCHEMICALS on October 10, 2024 and sell it today you would earn a total of  2,492  from holding AIR PRODCHEMICALS or generate 10.06% return on investment over 90 days.

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

AIR PRODCHEMICALS  vs.  China Eastern Airlines

AIR PRODCHEMICALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

China Eastern Airlines

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Eastern Airlines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Eastern reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIR PRODCHEMICALS and China Eastern

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

The idea behind AIR PRODCHEMICALS and China Eastern Airlines 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.