Correlation Between China Airlines and Great Taipei
Can any of the company-specific risk be diversified away by investing in both China Airlines and Great Taipei 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 Taipei 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 Taipei Gas, you can compare the effects of market volatilities on China Airlines and Great Taipei 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 Taipei. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and Great Taipei.
Diversification Opportunities for China Airlines and Great Taipei
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Great is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and Great Taipei Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Taipei Gas 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 Taipei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Taipei Gas has no effect on the direction of China Airlines i.e., China Airlines and Great Taipei go up and down completely randomly.
Pair Corralation between China Airlines and Great Taipei
Assuming the 90 days trading horizon China Airlines is expected to generate 4.46 times more return on investment than Great Taipei. However, China Airlines is 4.46 times more volatile than Great Taipei Gas. It trades about 0.39 of its potential returns per unit of risk. Great Taipei Gas is currently generating about 0.12 per unit of risk. If you would invest 2,260 in China Airlines on August 31, 2024 and sell it today you would earn a total of 205.00 from holding China Airlines or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Airlines vs. Great Taipei Gas
Performance |
| Timeline |
| China Airlines |
| Great Taipei Gas |
China Airlines and Great Taipei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Airlines and Great Taipei
The main advantage of trading using opposite China Airlines and Great Taipei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Airlines position performs unexpectedly, Great Taipei 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 Taipei will offset losses from the drop in Great Taipei'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 Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Taiwan Cogeneration Corp | Great Taipei vs. Shin Shin Natural |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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