Correlation Between China Southern and Cebu Air
Can any of the company-specific risk be diversified away by investing in both China Southern and Cebu Air 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 Cebu Air 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 Cebu Air, you can compare the effects of market volatilities on China Southern and Cebu Air 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 Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and Cebu Air.
Diversification Opportunities for China Southern and Cebu Air
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Cebu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air 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 Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air has no effect on the direction of China Southern i.e., China Southern and Cebu Air go up and down completely randomly.
Pair Corralation between China Southern and Cebu Air
Assuming the 90 days horizon China Southern Airlines is expected to generate 0.97 times more return on investment than Cebu Air. However, China Southern Airlines is 1.03 times less risky than Cebu Air. It trades about 0.0 of its potential returns per unit of risk. Cebu Air is currently generating about -0.04 per unit of risk. If you would invest 65.00 in China Southern Airlines on November 2, 2024 and sell it today you would lose (19.00) from holding China Southern Airlines or give up 29.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
China Southern Airlines vs. Cebu Air
Performance |
| Timeline |
| China Southern Airlines |
| Cebu Air |
China Southern and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Southern and Cebu Air
The main advantage of trading using opposite China Southern and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern position performs unexpectedly, Cebu Air 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 Cebu Air will offset losses from the drop in Cebu Air's long position.| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
| Cebu Air vs. Air France KLM SA | Cebu Air vs. easyJet plc | Cebu Air vs. Norse Atlantic ASA | Cebu Air vs. Air China 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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