Correlation Between Air China and EasyJet Plc
Can any of the company-specific risk be diversified away by investing in both Air China and EasyJet Plc 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 EasyJet Plc 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 easyJet plc, you can compare the effects of market volatilities on Air China and EasyJet Plc 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 EasyJet Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and EasyJet Plc.
Diversification Opportunities for Air China and EasyJet Plc
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Air and EasyJet is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and easyJet plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on easyJet plc 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 EasyJet Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of easyJet plc has no effect on the direction of Air China i.e., Air China and EasyJet Plc go up and down completely randomly.
Pair Corralation between Air China and EasyJet Plc
Assuming the 90 days horizon Air China Limited is expected to under-perform the EasyJet Plc. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air China Limited is 1.25 times less risky than EasyJet Plc. The pink sheet trades about -0.05 of its potential returns per unit of risk. The easyJet plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 538.00 in easyJet plc on August 24, 2024 and sell it today you would earn a total of 81.00 from holding easyJet plc or generate 15.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 77.83% |
| Values | Daily Returns |
Air China Limited vs. easyJet plc
Performance |
| Timeline |
| Air China Limited |
| easyJet plc |
Air China and EasyJet Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and EasyJet Plc
The main advantage of trading using opposite Air China and EasyJet Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, EasyJet Plc 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 EasyJet Plc will offset losses from the drop in EasyJet Plc's long position.| Air China vs. Cebu Air | Air China vs. Finnair Oyj | Air China vs. easyJet plc | Air China vs. Norse Atlantic ASA |
| EasyJet Plc vs. Finnair Oyj | EasyJet Plc vs. Norse Atlantic ASA | EasyJet Plc vs. Air New Zealand | EasyJet Plc vs. Air China Limited |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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