Correlation Between AIR CHINA and Controladora Vuela
Can any of the company-specific risk be diversified away by investing in both AIR CHINA and Controladora Vuela 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 Controladora Vuela into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR CHINA LTD and Controladora Vuela Compaa, you can compare the effects of market volatilities on AIR CHINA and Controladora Vuela 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 Controladora Vuela. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR CHINA and Controladora Vuela.
Diversification Opportunities for AIR CHINA and Controladora Vuela
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AIR and Controladora is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding AIR CHINA LTD and Controladora Vuela Compaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Controladora Vuela Compaa 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 LTD are associated (or correlated) with Controladora Vuela. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Controladora Vuela Compaa has no effect on the direction of AIR CHINA i.e., AIR CHINA and Controladora Vuela go up and down completely randomly.
Pair Corralation between AIR CHINA and Controladora Vuela
Assuming the 90 days trading horizon AIR CHINA LTD is expected to generate 1.63 times more return on investment than Controladora Vuela. However, AIR CHINA is 1.63 times more volatile than Controladora Vuela Compaa. It trades about 0.22 of its potential returns per unit of risk. Controladora Vuela Compaa is currently generating about 0.17 per unit of risk. 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 Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR CHINA LTD vs. Controladora Vuela Compaa
Performance |
| Timeline |
| AIR CHINA LTD |
| Controladora Vuela Compaa |
AIR CHINA and Controladora Vuela Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR CHINA and Controladora Vuela
The main advantage of trading using opposite AIR CHINA and Controladora Vuela positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR CHINA position performs unexpectedly, Controladora Vuela 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 Controladora Vuela will offset losses from the drop in Controladora Vuela's long position.| AIR CHINA vs. VARIOUS EATERIES LS | AIR CHINA vs. Darden Restaurants | AIR CHINA vs. BE Semiconductor Industries | AIR CHINA vs. China BlueChemical |
| Controladora Vuela vs. Delta Air Lines | Controladora Vuela vs. Air China Limited | Controladora Vuela vs. AIR CHINA LTD | Controladora Vuela vs. RYANAIR HLDGS ADR |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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