Correlation Between China Aircraft and China Southern
Can any of the company-specific risk be diversified away by investing in both China Aircraft 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 Aircraft 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 Aircraft Leasing and China Southern Airlines, you can compare the effects of market volatilities on China Aircraft 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 Aircraft with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Aircraft and China Southern.
Diversification Opportunities for China Aircraft and China Southern
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing 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 Aircraft 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 Aircraft Leasing 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 Aircraft i.e., China Aircraft and China Southern go up and down completely randomly.
Pair Corralation between China Aircraft and China Southern
Assuming the 90 days horizon China Aircraft Leasing is expected to generate 2.16 times more return on investment than China Southern. However, China Aircraft is 2.16 times more volatile than China Southern Airlines. It trades about 0.08 of its potential returns per unit of risk. China Southern Airlines is currently generating about 0.06 per unit of risk. If you would invest 13.00 in China Aircraft Leasing on September 4, 2024 and sell it today you would earn a total of 27.00 from holding China Aircraft Leasing or generate 207.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 7.59% |
| Values | Daily Returns |
China Aircraft Leasing vs. China Southern Airlines
Performance |
| Timeline |
| China Aircraft Leasing |
| China Southern Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Aircraft and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Aircraft and China Southern
The main advantage of trading using opposite China Aircraft and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft 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 Aircraft vs. Playtika Holding Corp | China Aircraft vs. Eldorado Gold Corp | China Aircraft vs. Xponential Fitness | China Aircraft vs. Highway Holdings Limited |
| China Southern vs. BRP Inc | China Southern vs. Axalta Coating Systems | China Southern vs. Chemours Co | China Southern vs. JD Sports Fashion |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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