Correlation Between Air China and AIR CHINA
Can any of the company-specific risk be diversified away by investing in both Air China 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 Air China and AIR CHINA 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 AIR CHINA LTD, you can compare the effects of market volatilities on Air China 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 Air China with a short position of AIR CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and AIR CHINA.
Diversification Opportunities for Air China and AIR CHINA
No risk reduction
The 3 months correlation between Air and AIR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited 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 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 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 Air China i.e., Air China and AIR CHINA go up and down completely randomly.
Pair Corralation between Air China and AIR CHINA
Assuming the 90 days horizon Air China is expected to generate 1.23 times less return on investment than AIR CHINA. But when comparing it to its historical volatility, Air China Limited is 1.02 times less risky than AIR CHINA. It trades about 0.28 of its potential returns per unit of risk. AIR CHINA LTD is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 960.00 in AIR CHINA LTD on August 28, 2024 and sell it today you would earn a total of 190.00 from holding AIR CHINA LTD or generate 19.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air China Limited vs. AIR CHINA LTD
Performance |
| Timeline |
| Air China Limited |
| AIR CHINA LTD |
Air China and AIR CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and AIR CHINA
The main advantage of trading using opposite Air China and AIR CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China 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.| Air China vs. British American Tobacco | Air China vs. SOFTBANK P ADR | Air China vs. COMINTL BANK ADR1 | Air China vs. MSAD INSURANCE |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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