Correlation Between Food Life and Air China
Can any of the company-specific risk be diversified away by investing in both Food Life and Air 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 Food Life and Air China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Food Life Companies and Air China Limited, you can compare the effects of market volatilities on Food Life and Air 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 Food Life with a short position of Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and Air China.
Diversification Opportunities for Food Life and Air China
Very poor diversification
The 3 months correlation between Food and Air is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited and Food Life 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 Food Life Companies are associated (or correlated) with Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of Food Life i.e., Food Life and Air China go up and down completely randomly.
Pair Corralation between Food Life and Air China
Assuming the 90 days horizon Food Life Companies is expected to generate 0.58 times more return on investment than Air China. However, Food Life Companies is 1.73 times less risky than Air China. It trades about 0.11 of its potential returns per unit of risk. Air China Limited is currently generating about 0.06 per unit of risk. If you would invest 1,580 in Food Life Companies on September 3, 2024 and sell it today you would earn a total of 560.00 from holding Food Life Companies or generate 35.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Food Life Companies vs. Air China Limited
Performance |
| Timeline |
| Food Life Companies |
| Air China Limited |
Food Life and Air China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Food Life and Air China
The main advantage of trading using opposite Food Life and Air China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life position performs unexpectedly, Air 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 Air China will offset losses from the drop in Air China's long position.| Food Life vs. McDonalds | Food Life vs. Chipotle Mexican Grill | Food Life vs. Superior Plus Corp | Food Life vs. NMI Holdings |
| Air China vs. Entravision Communications | Air China vs. Hemisphere Energy Corp | Air China vs. Charter Communications | Air China vs. LION ONE METALS |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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