Correlation Between AOYAMA TRADING and China Eastern
Can any of the company-specific risk be diversified away by investing in both AOYAMA TRADING and China Eastern 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 AOYAMA TRADING and China Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AOYAMA TRADING and China Eastern Airlines, you can compare the effects of market volatilities on AOYAMA TRADING and China Eastern 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 AOYAMA TRADING with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of AOYAMA TRADING and China Eastern.
Diversification Opportunities for AOYAMA TRADING and China Eastern
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AOYAMA and China is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AOYAMA TRADING and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines and AOYAMA TRADING 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 AOYAMA TRADING are associated (or correlated) with China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of AOYAMA TRADING i.e., AOYAMA TRADING and China Eastern go up and down completely randomly.
Pair Corralation between AOYAMA TRADING and China Eastern
Assuming the 90 days horizon AOYAMA TRADING is expected to under-perform the China Eastern. But the stock apears to be less risky and, when comparing its historical volatility, AOYAMA TRADING is 2.46 times less risky than China Eastern. The stock trades about -0.2 of its potential returns per unit of risk. The China Eastern Airlines is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 31.00 in China Eastern Airlines on October 25, 2024 and sell it today you would earn a total of 1.00 from holding China Eastern Airlines or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AOYAMA TRADING vs. China Eastern Airlines
Performance |
| Timeline |
| AOYAMA TRADING |
| China Eastern Airlines |
AOYAMA TRADING and China Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AOYAMA TRADING and China Eastern
The main advantage of trading using opposite AOYAMA TRADING and China Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AOYAMA TRADING position performs unexpectedly, China Eastern 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 Eastern will offset losses from the drop in China Eastern's long position.The idea behind AOYAMA TRADING and China Eastern Airlines 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.| China Eastern vs. MARKET VECTR RETAIL | China Eastern vs. KENEDIX OFFICE INV | China Eastern vs. Caseys General Stores | China Eastern vs. HOME DEPOT |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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