Correlation Between Chang Hwa and China Airlines
Can any of the company-specific risk be diversified away by investing in both Chang Hwa and China Airlines 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 Chang Hwa and China Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chang Hwa Commercial and China Airlines, you can compare the effects of market volatilities on Chang Hwa and China Airlines 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 Chang Hwa with a short position of China Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chang Hwa and China Airlines.
Diversification Opportunities for Chang Hwa and China Airlines
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Chang and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chang Hwa Commercial and China Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Airlines and Chang Hwa 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 Chang Hwa Commercial are associated (or correlated) with China Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Airlines has no effect on the direction of Chang Hwa i.e., Chang Hwa and China Airlines go up and down completely randomly.
Pair Corralation between Chang Hwa and China Airlines
Assuming the 90 days trading horizon Chang Hwa Commercial is expected to under-perform the China Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Chang Hwa Commercial is 1.95 times less risky than China Airlines. The stock trades about -0.02 of its potential returns per unit of risk. The China Airlines is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,215 in China Airlines on September 1, 2024 and sell it today you would earn a total of 275.00 from holding China Airlines or generate 12.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chang Hwa Commercial vs. China Airlines
Performance |
| Timeline |
| Chang Hwa Commercial |
| China Airlines |
Chang Hwa and China Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chang Hwa and China Airlines
The main advantage of trading using opposite Chang Hwa and China Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chang Hwa position performs unexpectedly, China Airlines 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 China Airlines will offset losses from the drop in China Airlines' long position.| Chang Hwa vs. Central Reinsurance Corp | Chang Hwa vs. Huaku Development Co | Chang Hwa vs. Fubon Financial Holding |
| China Airlines vs. Eva Airways Corp | China Airlines vs. Evergreen Marine Corp | China Airlines vs. Yang Ming Marine | China Airlines vs. China Steel Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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