Correlation Between Chongqing Changan and Air China
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By analyzing existing cross correlation between Chongqing Changan Automobile and Air China Ltd, you can compare the effects of market volatilities on Chongqing Changan 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 Chongqing Changan with a short position of Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Changan and Air China.
Diversification Opportunities for Chongqing Changan and Air China
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Chongqing and Air is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile and Air China Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China and Chongqing Changan 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 Chongqing Changan Automobile 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 Chongqing Changan i.e., Chongqing Changan and Air China go up and down completely randomly.
Pair Corralation between Chongqing Changan and Air China
Assuming the 90 days trading horizon Chongqing Changan Automobile is expected to generate 1.52 times more return on investment than Air China. However, Chongqing Changan is 1.52 times more volatile than Air China Ltd. It trades about 0.01 of its potential returns per unit of risk. Air China Ltd is currently generating about -0.04 per unit of risk. If you would invest 1,291 in Chongqing Changan Automobile on November 9, 2024 and sell it today you would earn a total of 25.00 from holding Chongqing Changan Automobile or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chongqing Changan Automobile vs. Air China Ltd
Performance |
| Timeline |
| Chongqing Changan |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| Air China |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Chongqing Changan and Air China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Changan and Air China
The main advantage of trading using opposite Chongqing Changan and Air China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Changan 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 Chongqing Changan Automobile 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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