Correlation Between Air China and GuoChuang Software
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By analyzing existing cross correlation between Air China Ltd and GuoChuang Software Co, you can compare the effects of market volatilities on Air China and GuoChuang Software 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 Air China with a short position of GuoChuang Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and GuoChuang Software.
Diversification Opportunities for Air China and GuoChuang Software
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and GuoChuang is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and GuoChuang Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GuoChuang Software and Air China 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 Air China Ltd are associated (or correlated) with GuoChuang Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GuoChuang Software has no effect on the direction of Air China i.e., Air China and GuoChuang Software go up and down completely randomly.
Pair Corralation between Air China and GuoChuang Software
Assuming the 90 days trading horizon Air China Ltd is expected to under-perform the GuoChuang Software. But the stock apears to be less risky and, when comparing its historical volatility, Air China Ltd is 1.93 times less risky than GuoChuang Software. The stock trades about -0.02 of its potential returns per unit of risk. The GuoChuang Software Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,479 in GuoChuang Software Co on November 7, 2024 and sell it today you would lose (69.00) from holding GuoChuang Software Co or give up 2.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air China Ltd vs. GuoChuang Software Co
Performance |
| Timeline |
| Air China |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| GuoChuang Software |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Air China and GuoChuang Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and GuoChuang Software
The main advantage of trading using opposite Air China and GuoChuang Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, GuoChuang Software 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 GuoChuang Software will offset losses from the drop in GuoChuang Software's long position.The idea behind Air China Ltd and GuoChuang Software Co 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.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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