Correlation Between Air China and Global Crossing
Can any of the company-specific risk be diversified away by investing in both Air China and Global Crossing 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 Global Crossing 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 Global Crossing Airlines, you can compare the effects of market volatilities on Air China and Global Crossing 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 Global Crossing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Global Crossing.
Diversification Opportunities for Air China and Global Crossing
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Global is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and Global Crossing Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Crossing Airlines 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 Global Crossing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Crossing Airlines has no effect on the direction of Air China i.e., Air China and Global Crossing go up and down completely randomly.
Pair Corralation between Air China and Global Crossing
Assuming the 90 days horizon Air China Limited is expected to under-perform the Global Crossing. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air China Limited is 1.79 times less risky than Global Crossing. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Global Crossing Airlines is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 135.00 in Global Crossing Airlines on November 2, 2024 and sell it today you would lose (71.00) from holding Global Crossing Airlines or give up 52.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 66.4% |
| Values | Daily Returns |
Air China Limited vs. Global Crossing Airlines
Performance |
| Timeline |
| Air China Limited |
| Global Crossing Airlines |
Air China and Global Crossing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and Global Crossing
The main advantage of trading using opposite Air China and Global Crossing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, Global Crossing 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 Global Crossing will offset losses from the drop in Global Crossing's long position.| Air China vs. Cebu Air | Air China vs. Finnair Oyj | Air China vs. easyJet plc | Air China vs. Norse Atlantic ASA |
| Global Crossing vs. Finnair Oyj | Global Crossing vs. easyJet plc | Global Crossing vs. Norse Atlantic ASA | Global Crossing vs. Air New Zealand |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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