Correlation Between China Eastern and China Southern
Can any of the company-specific risk be diversified away by investing in both China Eastern 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 China Eastern and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Eastern Airlines and China Southern Airlines, you can compare the effects of market volatilities on China Eastern 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 China Eastern with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Eastern and China Southern.
Diversification Opportunities for China Eastern and China Southern
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and China is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines 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 China Eastern 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 Eastern Airlines 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 China Eastern i.e., China Eastern and China Southern go up and down completely randomly.
Pair Corralation between China Eastern and China Southern
If you would invest 40.00 in China Southern Airlines on August 31, 2024 and sell it today you would earn a total of 6.00 from holding China Southern Airlines or generate 15.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
China Eastern Airlines vs. China Southern Airlines
Performance |
| Timeline |
| China Eastern Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| China Southern Airlines |
China Eastern and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Eastern and China Southern
The main advantage of trading using opposite China Eastern and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Eastern 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.| China Eastern vs. Chester Mining | China Eastern vs. Ross Stores | China Eastern vs. Jacobs Solutions | China Eastern vs. Silo Pharma |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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