Correlation Between Air China and China Resources
Can any of the company-specific risk be diversified away by investing in both Air China and China Resources 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 China Resources 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 China Resources Beer, you can compare the effects of market volatilities on Air China and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and China Resources.
Diversification Opportunities for Air China and China Resources
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Air and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Air China i.e., Air China and China Resources go up and down completely randomly.
Pair Corralation between Air China and China Resources
Assuming the 90 days horizon Air China Ltd is expected to generate 0.88 times more return on investment than China Resources. However, Air China Ltd is 1.14 times less risky than China Resources. It trades about 0.26 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.25 per unit of risk. If you would invest 1,081 in Air China Ltd on August 28, 2024 and sell it today you would earn a total of 169.00 from holding Air China Ltd or generate 15.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Air China Ltd vs. China Resources Beer
Performance |
| Timeline |
| Air China |
| China Resources Beer |
Air China and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and China Resources
The main advantage of trading using opposite Air China and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Air China vs. Singapore Airlines | Air China vs. Singapore Airlines | Air China vs. Qantas Airways Ltd | Air China vs. Copa Holdings SA |
| China Resources vs. Budweiser Brewing | China Resources vs. Anheuser Busch InBev SANV | China Resources vs. Anheuser Busch Inbev | China Resources vs. Molson Coors Brewing |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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