Correlation Between SWK Holdings and China Eastern

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

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

Diversification Opportunities for SWK Holdings and China Eastern

0.13

Correlation Coefficient

SWK Holdings  China Eastern

Average diversification

The 3 months correlation between SWK and China is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding SWK Holdings Corp 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 SWK Holdings 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 SWK Holdings Corp 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 SWK Holdings i.e., SWK Holdings and China Eastern go up and down completely randomly.

Pair Corralation between SWK Holdings and China Eastern

If you would invest  1,701  in SWK Holdings Corp on February 2, 2024 and sell it today you would earn a total of  43.00  from holding SWK Holdings Corp or generate 2.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

SWK Holdings Corp  vs.  China Eastern Airlines

SWK Holdings Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SWK Holdings Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, SWK Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

China Eastern Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Eastern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, China Eastern is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SWK Holdings and China Eastern

The main advantage of trading using opposite SWK Holdings and China Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWK Holdings 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 SWK Holdings Corp 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.