Correlation Between PT Bank and China Southern
Can any of the company-specific risk be diversified away by investing in both PT Bank and China Southern 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 PT Bank and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Bank Rakyat and China Southern Airlines, you can compare the effects of market volatilities on PT Bank and China Southern 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 PT Bank with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and China Southern.
Diversification Opportunities for PT Bank and China Southern
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BKRKF and China is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines and PT Bank 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 PT Bank Rakyat are associated (or correlated) with China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of PT Bank i.e., PT Bank and China Southern go up and down completely randomly.
Pair Corralation between PT Bank and China Southern
Assuming the 90 days horizon PT Bank Rakyat is expected to under-perform the China Southern. In addition to that, PT Bank is 1.11 times more volatile than China Southern Airlines. It trades about -0.03 of its total potential returns per unit of risk. China Southern Airlines is currently generating about 0.16 per unit of volatility. If you would invest 33.00 in China Southern Airlines on August 26, 2024 and sell it today you would earn a total of 13.00 from holding China Southern Airlines or generate 39.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Bank Rakyat vs. China Southern Airlines
Performance |
| Timeline |
| PT Bank Rakyat |
| China Southern Airlines |
PT Bank and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and China Southern
The main advantage of trading using opposite PT Bank and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, China Southern 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 Southern will offset losses from the drop in China Southern's long position.The idea behind PT Bank Rakyat and China Southern Airlines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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