Correlation Between China Airlines and BizLink Holding
Can any of the company-specific risk be diversified away by investing in both China Airlines and BizLink Holding 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 BizLink Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Airlines and BizLink Holding, you can compare the effects of market volatilities on China Airlines and BizLink Holding 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 BizLink Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and BizLink Holding.
Diversification Opportunities for China Airlines and BizLink Holding
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between China and BizLink is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and BizLink Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BizLink Holding 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 BizLink Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BizLink Holding has no effect on the direction of China Airlines i.e., China Airlines and BizLink Holding go up and down completely randomly.
Pair Corralation between China Airlines and BizLink Holding
Assuming the 90 days trading horizon China Airlines is expected to generate 1.92 times less return on investment than BizLink Holding. But when comparing it to its historical volatility, China Airlines is 1.87 times less risky than BizLink Holding. It trades about 0.26 of its potential returns per unit of risk. BizLink Holding is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 56,100 in BizLink Holding on September 19, 2024 and sell it today you would earn a total of 11,500 from holding BizLink Holding or generate 20.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Airlines vs. BizLink Holding
Performance |
| Timeline |
| China Airlines |
| BizLink Holding |
China Airlines and BizLink Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Airlines and BizLink Holding
The main advantage of trading using opposite China Airlines and BizLink Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Airlines position performs unexpectedly, BizLink Holding 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 BizLink Holding will offset losses from the drop in BizLink Holding's long position.The idea behind China Airlines and BizLink Holding 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.| BizLink Holding vs. Hota Industrial Mfg | BizLink Holding vs. Chroma ATE | BizLink Holding vs. Sinbon Electronics Co | BizLink Holding vs. Tong Hsing Electronic |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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