Correlation Between Air China and ANA Holdings
Can any of the company-specific risk be diversified away by investing in both Air China and ANA Holdings 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 ANA Holdings 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 ANA Holdings ADR, you can compare the effects of market volatilities on Air China and ANA Holdings 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 ANA Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and ANA Holdings.
Diversification Opportunities for Air China and ANA Holdings
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and ANA is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and ANA Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANA Holdings ADR 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 ANA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANA Holdings ADR has no effect on the direction of Air China i.e., Air China and ANA Holdings go up and down completely randomly.
Pair Corralation between Air China and ANA Holdings
Assuming the 90 days horizon Air China Limited is expected to generate 1.38 times more return on investment than ANA Holdings. However, Air China is 1.38 times more volatile than ANA Holdings ADR. It trades about 0.22 of its potential returns per unit of risk. ANA Holdings ADR is currently generating about 0.03 per unit of risk. If you would invest 50.00 in Air China Limited on August 28, 2024 and sell it today you would earn a total of 9.00 from holding Air China Limited or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air China Limited vs. ANA Holdings ADR
Performance |
| Timeline |
| Air China Limited |
| ANA Holdings ADR |
Air China and ANA Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and ANA Holdings
The main advantage of trading using opposite Air China and ANA Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, ANA Holdings 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 ANA Holdings will offset losses from the drop in ANA Holdings' long position.| Air China vs. Cebu Air | Air China vs. Finnair Oyj | Air China vs. easyJet plc | Air China vs. Norse Atlantic ASA |
| ANA Holdings vs. Cathay Pacific Airways | ANA Holdings vs. Air China Ltd | ANA Holdings vs. Ajinomoto Co ADR | ANA Holdings vs. Qantas Airways Ltd |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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