Correlation Between Beijing Shunxin and Eastern Air

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

By analyzing existing cross correlation between Beijing Shunxin Agriculture and Eastern Air Logistics, you can compare the effects of market volatilities on Beijing Shunxin and Eastern Air 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 Beijing Shunxin with a short position of Eastern Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Shunxin and Eastern Air.

Diversification Opportunities for Beijing Shunxin and Eastern Air

0.73

Correlation Coefficient

Beijing Shunxin  Eastern Air

Poor diversification

The 3 months correlation between Beijing and Eastern is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Shunxin Agriculture and Eastern Air Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Air Logistics and Beijing Shunxin 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 Beijing Shunxin Agriculture are associated (or correlated) with Eastern Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Air Logistics has no effect on the direction of Beijing Shunxin i.e., Beijing Shunxin and Eastern Air go up and down completely randomly.

Pair Corralation between Beijing Shunxin and Eastern Air

Assuming the 90 days trading horizon Beijing Shunxin Agriculture is expected to generate 1.15 times more return on investment than Eastern Air. However, Beijing Shunxin is 1.15 times more volatile than Eastern Air Logistics. It trades about 0.05 of its potential returns per unit of risk. Eastern Air Logistics is currently generating about -0.03 per unit of risk. If you would invest  1,796  in Beijing Shunxin Agriculture on September 15, 2024 and sell it today you would earn a total of  237.00  from holding Beijing Shunxin Agriculture or generate 13.2% return on investment over 90 days.

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

Beijing Shunxin Agriculture  vs.  Eastern Air Logistics

Beijing Shunxin Agri

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Shunxin Agriculture are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Shunxin sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastern Air Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Air Logistics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastern Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Shunxin and Eastern Air

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

The idea behind Beijing Shunxin Agriculture and Eastern Air Logistics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.