Correlation Between China Southern and Air New
Can any of the company-specific risk be diversified away by investing in both China Southern and Air New 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 Air New 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 Air New Zealand, you can compare the effects of market volatilities on China Southern and Air New 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 Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and Air New.
Diversification Opportunities for China Southern and Air New
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Air is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of China Southern i.e., China Southern and Air New go up and down completely randomly.
Pair Corralation between China Southern and Air New
Assuming the 90 days horizon China Southern Airlines is expected to generate 1.08 times more return on investment than Air New. However, China Southern is 1.08 times more volatile than Air New Zealand. It trades about 0.29 of its potential returns per unit of risk. Air New Zealand is currently generating about 0.2 per unit of risk. If you would invest 40.00 in China Southern Airlines on August 28, 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Southern Airlines vs. Air New Zealand
Performance |
| Timeline |
| China Southern Airlines |
| Air New Zealand |
China Southern and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Southern and Air New
The main advantage of trading using opposite China Southern and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern position performs unexpectedly, Air New 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 Air New will offset losses from the drop in Air New's long position.| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
| Air New vs. AirAsia Group Berhad | Air New vs. ANA Holdings ADR | Air New vs. Cebu Air | Air New 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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