Correlation Between Air China and ConocoPhillips
Can any of the company-specific risk be diversified away by investing in both Air China and ConocoPhillips 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 ConocoPhillips 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 ConocoPhillips, you can compare the effects of market volatilities on Air China and ConocoPhillips 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 ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and ConocoPhillips.
Diversification Opportunities for Air China and ConocoPhillips
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and ConocoPhillips is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Air China i.e., Air China and ConocoPhillips go up and down completely randomly.
Pair Corralation between Air China and ConocoPhillips
Assuming the 90 days horizon Air China Limited is expected to generate 0.9 times more return on investment than ConocoPhillips. However, Air China Limited is 1.11 times less risky than ConocoPhillips. It trades about 0.43 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.05 per unit of risk. If you would invest 51.00 in Air China Limited on September 2, 2024 and sell it today you would earn a total of 9.00 from holding Air China Limited or generate 17.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air China Limited vs. ConocoPhillips
Performance |
| Timeline |
| Air China Limited |
| ConocoPhillips |
Air China and ConocoPhillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and ConocoPhillips
The main advantage of trading using opposite Air China and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.| Air China vs. Grupo Carso SAB | Air China vs. CARSALESCOM | Air China vs. NIPPON MEAT PACKERS | Air China vs. Food Life Companies |
| ConocoPhillips vs. CyberArk Software | ConocoPhillips vs. ADRIATIC METALS LS 013355 | ConocoPhillips vs. MCEWEN MINING INC | ConocoPhillips vs. SERI INDUSTRIAL EO |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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