Correlation Between Air China and Deutsche Lufthansa
Can any of the company-specific risk be diversified away by investing in both Air China and Deutsche Lufthansa 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 Deutsche Lufthansa 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 Deutsche Lufthansa AG, you can compare the effects of market volatilities on Air China and Deutsche Lufthansa 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 Deutsche Lufthansa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Deutsche Lufthansa.
Diversification Opportunities for Air China and Deutsche Lufthansa
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and Deutsche is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and Deutsche Lufthansa AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Lufthansa 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 Deutsche Lufthansa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Lufthansa has no effect on the direction of Air China i.e., Air China and Deutsche Lufthansa go up and down completely randomly.
Pair Corralation between Air China and Deutsche Lufthansa
Assuming the 90 days horizon Air China Ltd is expected to generate 0.75 times more return on investment than Deutsche Lufthansa. However, Air China Ltd is 1.33 times less risky than Deutsche Lufthansa. It trades about -0.01 of its potential returns per unit of risk. Deutsche Lufthansa AG is currently generating about -0.01 per unit of risk. If you would invest 1,691 in Air China Ltd on November 2, 2024 and sell it today you would lose (391.00) from holding Air China Ltd or give up 23.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.95% |
| Values | Daily Returns |
Air China Ltd vs. Deutsche Lufthansa AG
Performance |
| Timeline |
| Air China |
| Deutsche Lufthansa |
Air China and Deutsche Lufthansa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and Deutsche Lufthansa
The main advantage of trading using opposite Air China and Deutsche Lufthansa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, Deutsche Lufthansa 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 Deutsche Lufthansa will offset losses from the drop in Deutsche Lufthansa's long position.| Air China vs. Singapore Airlines | Air China vs. Singapore Airlines | Air China vs. Qantas Airways Ltd | Air China vs. Copa Holdings SA |
| Deutsche Lufthansa vs. Finnair Oyj | Deutsche Lufthansa vs. easyJet plc | Deutsche Lufthansa vs. Norse Atlantic ASA | Deutsche Lufthansa 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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