Correlation Between China Airlines and Great China
Can any of the company-specific risk be diversified away by investing in both China Airlines and Great China 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 Great China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Airlines and Great China Metal, you can compare the effects of market volatilities on China Airlines and Great 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 China Airlines with a short position of Great China. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and Great China.
Diversification Opportunities for China Airlines and Great China
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Great is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and Great China Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great China Metal 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 Great China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great China Metal has no effect on the direction of China Airlines i.e., China Airlines and Great China go up and down completely randomly.
Pair Corralation between China Airlines and Great China
Assuming the 90 days trading horizon China Airlines is expected to generate 2.16 times more return on investment than Great China. However, China Airlines is 2.16 times more volatile than Great China Metal. It trades about 0.45 of its potential returns per unit of risk. Great China Metal is currently generating about 0.0 per unit of risk. If you would invest 2,250 in China Airlines on September 2, 2024 and sell it today you would earn a total of 240.00 from holding China Airlines or generate 10.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Airlines vs. Great China Metal
Performance |
| Timeline |
| China Airlines |
| Great China Metal |
China Airlines and Great China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Airlines and Great China
The main advantage of trading using opposite China Airlines and Great China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Airlines position performs unexpectedly, Great 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 Great China will offset losses from the drop in Great China's long position.| China Airlines vs. Eva Airways Corp | China Airlines vs. Evergreen Marine Corp | China Airlines vs. Yang Ming Marine | China Airlines vs. China Steel Corp |
| Great China vs. Basso Industry Corp | Great China vs. Chung Hsin Electric Machinery | Great China vs. TYC Brother Industrial | Great China vs. TECO Electric Machinery |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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