Correlation Between Air China and New Residential
Can any of the company-specific risk be diversified away by investing in both Air China and New Residential 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 Air China and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air China Limited and New Residential Investment, you can compare the effects of market volatilities on Air China and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and New Residential.
Diversification Opportunities for Air China and New Residential
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Air and New is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 Limited are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Air China i.e., Air China and New Residential go up and down completely randomly.
Pair Corralation between Air China and New Residential
Assuming the 90 days horizon Air China Limited is expected to generate 3.07 times more return on investment than New Residential. However, Air China is 3.07 times more volatile than New Residential Investment. It trades about 0.35 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.23 per unit of risk. If you would invest 52.00 in Air China Limited on September 13, 2024 and sell it today you would earn a total of 12.00 from holding Air China Limited or generate 23.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air China Limited vs. New Residential Investment
Performance |
| Timeline |
| Air China Limited |
| New Residential Inve |
Air China and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and New Residential
The main advantage of trading using opposite Air China and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Air China vs. Postal Savings Bank | Air China vs. Chuangs China Investments | Air China vs. PREMIER FOODS | Air China vs. ECHO INVESTMENT ZY |
| New Residential vs. PLAYTIKA HOLDING DL 01 | New Residential vs. Nine Dragons Paper | New Residential vs. Sunstone Hotel Investors | New Residential vs. Onxeo SA |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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