Correlation Between China Eastern and SOFI TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both China Eastern and SOFI TECHNOLOGIES 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 Eastern and SOFI TECHNOLOGIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Eastern Airlines and SOFI TECHNOLOGIES, you can compare the effects of market volatilities on China Eastern and SOFI TECHNOLOGIES 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 Eastern with a short position of SOFI TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Eastern and SOFI TECHNOLOGIES.
Diversification Opportunities for China Eastern and SOFI TECHNOLOGIES
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and SOFI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES and China Eastern 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 Eastern Airlines are associated (or correlated) with SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of China Eastern i.e., China Eastern and SOFI TECHNOLOGIES go up and down completely randomly.
Pair Corralation between China Eastern and SOFI TECHNOLOGIES
Assuming the 90 days trading horizon China Eastern is expected to generate 6.16 times less return on investment than SOFI TECHNOLOGIES. But when comparing it to its historical volatility, China Eastern Airlines is 1.06 times less risky than SOFI TECHNOLOGIES. It trades about 0.01 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 673.00 in SOFI TECHNOLOGIES on October 30, 2024 and sell it today you would earn a total of 1,049 from holding SOFI TECHNOLOGIES or generate 155.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Eastern Airlines vs. SOFI TECHNOLOGIES
Performance |
| Timeline |
| China Eastern Airlines |
| SOFI TECHNOLOGIES |
China Eastern and SOFI TECHNOLOGIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Eastern and SOFI TECHNOLOGIES
The main advantage of trading using opposite China Eastern and SOFI TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Eastern position performs unexpectedly, SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES will offset losses from the drop in SOFI TECHNOLOGIES's long position.| China Eastern vs. Urban Outfitters | China Eastern vs. BII Railway Transportation | China Eastern vs. SOLSTAD OFFSHORE NK | China Eastern vs. Gold Road Resources |
| SOFI TECHNOLOGIES vs. AGF Management Limited | SOFI TECHNOLOGIES vs. CEOTRONICS | SOFI TECHNOLOGIES vs. Cal Maine Foods | SOFI TECHNOLOGIES vs. SENECA FOODS A |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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