Correlation Between Air China and Singapore Airlines
Can any of the company-specific risk be diversified away by investing in both Air China and Singapore Airlines 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 Singapore Airlines 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 Singapore Airlines, you can compare the effects of market volatilities on Air China and Singapore Airlines 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 Singapore Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Singapore Airlines.
Diversification Opportunities for Air China and Singapore Airlines
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Singapore is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and Singapore Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore 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 Ltd are associated (or correlated) with Singapore Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Airlines has no effect on the direction of Air China i.e., Air China and Singapore Airlines go up and down completely randomly.
Pair Corralation between Air China and Singapore Airlines
Assuming the 90 days horizon Air China is expected to generate 3.31 times less return on investment than Singapore Airlines. But when comparing it to its historical volatility, Air China Ltd is 1.49 times less risky than Singapore Airlines. It trades about 0.01 of its potential returns per unit of risk. Singapore Airlines is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 479.00 in Singapore Airlines on September 1, 2024 and sell it today you would lose (41.00) from holding Singapore Airlines or give up 8.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 75.81% |
| Values | Daily Returns |
Air China Ltd vs. Singapore Airlines
Performance |
| Timeline |
| Air China |
| Singapore Airlines |
Air China and Singapore Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and Singapore Airlines
The main advantage of trading using opposite Air China and Singapore Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, Singapore Airlines 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 Singapore Airlines will offset losses from the drop in Singapore Airlines' long position.| Air China vs. Singapore Airlines | Air China vs. Singapore Airlines | Air China vs. Qantas Airways Ltd | Air China vs. Copa Holdings SA |
| Singapore Airlines vs. Copa Holdings SA | Singapore Airlines vs. United Airlines Holdings | Singapore Airlines vs. Delta Air Lines | Singapore Airlines vs. SkyWest |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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