Correlation Between China Southern and Norse Atlantic
Can any of the company-specific risk be diversified away by investing in both China Southern and Norse Atlantic 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 Norse Atlantic 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 Norse Atlantic ASA, you can compare the effects of market volatilities on China Southern and Norse Atlantic 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 Norse Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and Norse Atlantic.
Diversification Opportunities for China Southern and Norse Atlantic
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Norse is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Norse Atlantic ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norse Atlantic ASA 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 Norse Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norse Atlantic ASA has no effect on the direction of China Southern i.e., China Southern and Norse Atlantic go up and down completely randomly.
Pair Corralation between China Southern and Norse Atlantic
Assuming the 90 days horizon China Southern Airlines is expected to generate 0.72 times more return on investment than Norse Atlantic. However, China Southern Airlines is 1.4 times less risky than Norse Atlantic. It trades about 0.0 of its potential returns per unit of risk. Norse Atlantic ASA is currently generating about -0.02 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 | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
China Southern Airlines vs. Norse Atlantic ASA
Performance |
| Timeline |
| China Southern Airlines |
| Norse Atlantic ASA |
China Southern and Norse Atlantic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Southern and Norse Atlantic
The main advantage of trading using opposite China Southern and Norse Atlantic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern position performs unexpectedly, Norse Atlantic 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 Norse Atlantic will offset losses from the drop in Norse Atlantic's long position.| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
| Norse Atlantic vs. Finnair Oyj | Norse Atlantic vs. easyJet plc | Norse Atlantic vs. Air New Zealand | Norse Atlantic 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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