Correlation Between Ningbo Fujia and Air China

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

By analyzing existing cross correlation between Ningbo Fujia Industrial and Air China Ltd, you can compare the effects of market volatilities on Ningbo Fujia and Air China 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 Ningbo Fujia with a short position of Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Fujia and Air China.

Diversification Opportunities for Ningbo Fujia and Air China

0.32

Correlation Coefficient

Ningbo Fujia  Air China

Weak diversification

The 3 months correlation between Ningbo and Air is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fujia Industrial and Air China Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China and Ningbo Fujia 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 Ningbo Fujia Industrial are associated (or correlated) with Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China has no effect on the direction of Ningbo Fujia i.e., Ningbo Fujia and Air China go up and down completely randomly.

Pair Corralation between Ningbo Fujia and Air China

Assuming the 90 days trading horizon Ningbo Fujia is expected to generate 1.53 times less return on investment than Air China. In addition to that, Ningbo Fujia is 1.69 times more volatile than Air China Ltd. It trades about 0.02 of its total potential returns per unit of risk. Air China Ltd is currently generating about 0.05 per unit of volatility. If you would invest  772.00  in Air China Ltd on October 1, 2024 and sell it today you would earn a total of  39.00  from holding Air China Ltd or generate 5.05% return on investment over 90 days.

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

Ningbo Fujia Industrial  vs.  Air China Ltd

Ningbo Fujia Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Fujia Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ningbo Fujia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Air China

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ningbo Fujia and Air China

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

The idea behind Ningbo Fujia Industrial and Air China Ltd 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.