Correlation Between Air New and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both Air New and Chongqing Machinery 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 New and Chongqing Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air New Zealand and Chongqing Machinery Electric, you can compare the effects of market volatilities on Air New and Chongqing Machinery 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 New with a short position of Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Chongqing Machinery.
Diversification Opportunities for Air New and Chongqing Machinery
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Air and Chongqing is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery and Air New 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 New Zealand are associated (or correlated) with Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of Air New i.e., Air New and Chongqing Machinery go up and down completely randomly.
Pair Corralation between Air New and Chongqing Machinery
Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the Chongqing Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 3.74 times less risky than Chongqing Machinery. The stock trades about -0.01 of its potential returns per unit of risk. The Chongqing Machinery Electric is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2.39 in Chongqing Machinery Electric on August 31, 2024 and sell it today you would earn a total of 4.96 from holding Chongqing Machinery Electric or generate 207.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Chongqing Machinery Electric
Performance |
| Timeline |
| Air New Zealand |
| Chongqing Machinery |
Air New and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Chongqing Machinery
The main advantage of trading using opposite Air New and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| Air New vs. SIVERS SEMICONDUCTORS AB | Air New vs. Darden Restaurants | Air New vs. Reliance Steel Aluminum | Air New vs. Q2M Managementberatung AG |
| Chongqing Machinery vs. ABB | Chongqing Machinery vs. Emerson Electric Co | Chongqing Machinery vs. Superior Plus Corp | Chongqing Machinery vs. NMI Holdings |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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