Correlation Between CHINA CONBANK and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both CHINA CONBANK and Southwest 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 CHINA CONBANK and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA BANK ADR20 and Southwest Airlines Co, you can compare the effects of market volatilities on CHINA CONBANK and Southwest 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 CHINA CONBANK with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA CONBANK and Southwest Airlines.
Diversification Opportunities for CHINA CONBANK and Southwest Airlines
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and Southwest is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CHINA BANK ADR20 and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and CHINA CONBANK 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 CHINA BANK ADR20 are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of CHINA CONBANK i.e., CHINA CONBANK and Southwest Airlines go up and down completely randomly.
Pair Corralation between CHINA CONBANK and Southwest Airlines
Assuming the 90 days trading horizon CHINA BANK ADR20 is expected to under-perform the Southwest Airlines. But the stock apears to be less risky and, when comparing its historical volatility, CHINA BANK ADR20 is 1.75 times less risky than Southwest Airlines. The stock trades about -0.02 of its potential returns per unit of risk. The Southwest Airlines Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,882 in Southwest Airlines Co on September 1, 2024 and sell it today you would earn a total of 165.00 from holding Southwest Airlines Co or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA BANK ADR20 vs. Southwest Airlines Co
Performance |
| Timeline |
| CHINA BANK ADR20 |
| Southwest Airlines |
CHINA CONBANK and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA CONBANK and Southwest Airlines
The main advantage of trading using opposite CHINA CONBANK and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA CONBANK position performs unexpectedly, Southwest 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| CHINA CONBANK vs. TSOGO SUN GAMING | CHINA CONBANK vs. GAMESTOP | CHINA CONBANK vs. American Public Education | CHINA CONBANK vs. FRACTAL GAMING GROUP |
| Southwest Airlines vs. Jacquet Metal Service | Southwest Airlines vs. Air New Zealand | Southwest Airlines vs. GRIFFIN MINING LTD | Southwest Airlines vs. Perseus Mining Limited |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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