Correlation Between Guilin Seamild and Hainan Airlines

Can any of the company-specific risk be diversified away by investing in both Guilin Seamild and Hainan Airlines 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 Guilin Seamild and Hainan Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guilin Seamild Foods and Hainan Airlines Co, you can compare the effects of market volatilities on Guilin Seamild and Hainan Airlines 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 Guilin Seamild with a short position of Hainan Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guilin Seamild and Hainan Airlines.

Diversification Opportunities for Guilin Seamild and Hainan Airlines

0.72

Correlation Coefficient

Guilin Seamild  Hainan Airlines

Poor diversification

The 3 months correlation between Guilin and Hainan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Guilin Seamild Foods and Hainan Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Airlines and Guilin Seamild 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 Guilin Seamild Foods are associated (or correlated) with Hainan Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Airlines has no effect on the direction of Guilin Seamild i.e., Guilin Seamild and Hainan Airlines go up and down completely randomly.

Pair Corralation between Guilin Seamild and Hainan Airlines

Assuming the 90 days trading horizon Guilin Seamild is expected to generate 2.41 times less return on investment than Hainan Airlines. But when comparing it to its historical volatility, Guilin Seamild Foods is 1.31 times less risky than Hainan Airlines. It trades about 0.06 of its potential returns per unit of risk. Hainan Airlines Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  115.00  in Hainan Airlines Co on September 30, 2024 and sell it today you would earn a total of  62.00  from holding Hainan Airlines Co or generate 53.91% return on investment over 90 days.

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

Guilin Seamild Foods  vs.  Hainan Airlines Co

Guilin Seamild Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guilin Seamild Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guilin Seamild sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Airlines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Airlines Co are ranked lower than 10 (%) 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.

Pair Trading with Guilin Seamild and Hainan Airlines

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

The idea behind Guilin Seamild Foods and Hainan Airlines Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.