Correlation Between China Southern and AirAsia Group
Can any of the company-specific risk be diversified away by investing in both China Southern and AirAsia Group 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 Southern and AirAsia Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Southern Airlines and AirAsia Group Berhad, you can compare the effects of market volatilities on China Southern and AirAsia Group 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 Southern with a short position of AirAsia Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and AirAsia Group.
Diversification Opportunities for China Southern and AirAsia Group
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and AirAsia is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and AirAsia Group Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirAsia Group Berhad and China Southern 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 Southern Airlines are associated (or correlated) with AirAsia Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirAsia Group Berhad has no effect on the direction of China Southern i.e., China Southern and AirAsia Group go up and down completely randomly.
Pair Corralation between China Southern and AirAsia Group
Assuming the 90 days horizon China Southern Airlines is expected to under-perform the AirAsia Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Southern Airlines is 1.19 times less risky than AirAsia Group. The pink sheet trades about -0.25 of its potential returns per unit of risk. The AirAsia Group Berhad is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 20.00 in AirAsia Group Berhad on November 2, 2024 and sell it today you would lose (2.00) from holding AirAsia Group Berhad or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Southern Airlines vs. AirAsia Group Berhad
Performance |
| Timeline |
| China Southern Airlines |
| AirAsia Group Berhad |
China Southern and AirAsia Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Southern and AirAsia Group
The main advantage of trading using opposite China Southern and AirAsia Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern position performs unexpectedly, AirAsia Group 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 AirAsia Group will offset losses from the drop in AirAsia Group's long position.| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
| AirAsia Group vs. Air New Zealand | AirAsia Group vs. ANA Holdings ADR | AirAsia Group vs. Cebu Air | AirAsia Group vs. Air France KLM SA |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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