Correlation Between VARIOUS EATERIES and AIR CHINA
Can any of the company-specific risk be diversified away by investing in both VARIOUS EATERIES 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 VARIOUS EATERIES and AIR CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VARIOUS EATERIES LS and AIR CHINA LTD, you can compare the effects of market volatilities on VARIOUS EATERIES 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 VARIOUS EATERIES with a short position of AIR CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and AIR CHINA.
Diversification Opportunities for VARIOUS EATERIES and AIR CHINA
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VARIOUS and AIR is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and AIR CHINA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR CHINA LTD and VARIOUS EATERIES 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 VARIOUS EATERIES LS 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 LTD has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and AIR CHINA go up and down completely randomly.
Pair Corralation between VARIOUS EATERIES and AIR CHINA
Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the AIR CHINA. But the stock apears to be less risky and, when comparing its historical volatility, VARIOUS EATERIES LS is 2.08 times less risky than AIR CHINA. The stock trades about -0.15 of its potential returns per unit of risk. The AIR CHINA LTD is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 900.00 in AIR CHINA LTD on September 23, 2024 and sell it today you would earn a total of 290.00 from holding AIR CHINA LTD or generate 32.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VARIOUS EATERIES LS vs. AIR CHINA LTD
Performance |
| Timeline |
| VARIOUS EATERIES |
| AIR CHINA LTD |
VARIOUS EATERIES and AIR CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VARIOUS EATERIES and AIR CHINA
The main advantage of trading using opposite VARIOUS EATERIES and AIR CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VARIOUS EATERIES 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.| VARIOUS EATERIES vs. DeVry Education Group | VARIOUS EATERIES vs. Carsales | VARIOUS EATERIES vs. AM EAGLE OUTFITTERS | VARIOUS EATERIES vs. American Public Education |
| AIR CHINA vs. VARIOUS EATERIES LS | AIR CHINA vs. Darden Restaurants | AIR CHINA vs. BE Semiconductor Industries | AIR CHINA vs. China BlueChemical |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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