Correlation Between JAPAN AIRLINES and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and CHINA HUARONG 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 JAPAN AIRLINES and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on JAPAN AIRLINES and CHINA HUARONG 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 JAPAN AIRLINES with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and CHINA HUARONG.
Diversification Opportunities for JAPAN AIRLINES and CHINA HUARONG
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between JAPAN and CHINA is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and JAPAN AIRLINES 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 JAPAN AIRLINES are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and CHINA HUARONG go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and CHINA HUARONG
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to under-perform the CHINA HUARONG. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN AIRLINES is 29.23 times less risky than CHINA HUARONG. The stock trades about -0.02 of its potential returns per unit of risk. The CHINA HUARONG ENERHD 50 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 0.50 in CHINA HUARONG ENERHD 50 on September 2, 2024 and sell it today you would lose (0.35) from holding CHINA HUARONG ENERHD 50 or give up 70.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN AIRLINES vs. CHINA HUARONG ENERHD 50
Performance |
| Timeline |
| JAPAN AIRLINES |
| CHINA HUARONG ENERHD |
JAPAN AIRLINES and CHINA HUARONG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN AIRLINES and CHINA HUARONG
The main advantage of trading using opposite JAPAN AIRLINES and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, CHINA HUARONG 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 HUARONG will offset losses from the drop in CHINA HUARONG's long position.| JAPAN AIRLINES vs. SIVERS SEMICONDUCTORS AB | JAPAN AIRLINES vs. Darden Restaurants | JAPAN AIRLINES vs. Reliance Steel Aluminum | JAPAN AIRLINES vs. Q2M Managementberatung AG |
| CHINA HUARONG vs. Retail Estates NV | CHINA HUARONG vs. BURLINGTON STORES | CHINA HUARONG vs. SPARTAN STORES | CHINA HUARONG vs. Madison Square Garden |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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