Correlation Between China Airlines and Mercuries Life
Can any of the company-specific risk be diversified away by investing in both China Airlines and Mercuries Life 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 China Airlines and Mercuries Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Airlines and Mercuries Life Insurance, you can compare the effects of market volatilities on China Airlines and Mercuries Life 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 China Airlines with a short position of Mercuries Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and Mercuries Life.
Diversification Opportunities for China Airlines and Mercuries Life
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Mercuries is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and Mercuries Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Life Insurance and China 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 China Airlines are associated (or correlated) with Mercuries Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Life Insurance has no effect on the direction of China Airlines i.e., China Airlines and Mercuries Life go up and down completely randomly.
Pair Corralation between China Airlines and Mercuries Life
Assuming the 90 days trading horizon China Airlines is expected to generate 1.16 times more return on investment than Mercuries Life. However, China Airlines is 1.16 times more volatile than Mercuries Life Insurance. It trades about 0.04 of its potential returns per unit of risk. Mercuries Life Insurance is currently generating about 0.03 per unit of risk. If you would invest 1,890 in China Airlines on November 2, 2024 and sell it today you would earn a total of 710.00 from holding China Airlines or generate 37.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Airlines vs. Mercuries Life Insurance
Performance |
| Timeline |
| China Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Mercuries Life Insurance |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Airlines and Mercuries Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Airlines and Mercuries Life
The main advantage of trading using opposite China Airlines and Mercuries Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Airlines position performs unexpectedly, Mercuries Life 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 Mercuries Life will offset losses from the drop in Mercuries Life's long position.The idea behind China Airlines and Mercuries Life Insurance 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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