Correlation Between China Southern and EasyJet Plc
Can any of the company-specific risk be diversified away by investing in both China Southern and EasyJet Plc 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 EasyJet Plc 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 easyJet plc, you can compare the effects of market volatilities on China Southern and EasyJet Plc 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 EasyJet Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and EasyJet Plc.
Diversification Opportunities for China Southern and EasyJet Plc
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and EasyJet is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and easyJet plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on easyJet plc 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 EasyJet Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of easyJet plc has no effect on the direction of China Southern i.e., China Southern and EasyJet Plc go up and down completely randomly.
Pair Corralation between China Southern and EasyJet Plc
Assuming the 90 days horizon China Southern is expected to generate 3.92 times less return on investment than EasyJet Plc. In addition to that, China Southern is 1.4 times more volatile than easyJet plc. It trades about 0.0 of its total potential returns per unit of risk. easyJet plc is currently generating about 0.03 per unit of volatility. If you would invest 563.00 in easyJet plc on November 2, 2024 and sell it today you would earn a total of 84.00 from holding easyJet plc or generate 14.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 74.85% |
| Values | Daily Returns |
China Southern Airlines vs. easyJet plc
Performance |
| Timeline |
| China Southern Airlines |
| easyJet plc |
China Southern and EasyJet Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Southern and EasyJet Plc
The main advantage of trading using opposite China Southern and EasyJet Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern position performs unexpectedly, EasyJet Plc 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 EasyJet Plc will offset losses from the drop in EasyJet Plc's long position.| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
| EasyJet Plc vs. Finnair Oyj | EasyJet Plc vs. Norse Atlantic ASA | EasyJet Plc vs. Air New Zealand | EasyJet Plc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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