Correlation Between China Communications and Air Canada
Can any of the company-specific risk be diversified away by investing in both China Communications and Air Canada 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 Communications and Air Canada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Communications Services and Air Canada, you can compare the effects of market volatilities on China Communications and Air Canada 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 Communications with a short position of Air Canada. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Air Canada.
Diversification Opportunities for China Communications and Air Canada
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Air is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and China Communications 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 Communications Services are associated (or correlated) with Air Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Canada has no effect on the direction of China Communications i.e., China Communications and Air Canada go up and down completely randomly.
Pair Corralation between China Communications and Air Canada
Assuming the 90 days horizon China Communications Services is expected to generate 2.15 times more return on investment than Air Canada. However, China Communications is 2.15 times more volatile than Air Canada. It trades about 0.06 of its potential returns per unit of risk. Air Canada is currently generating about -0.3 per unit of risk. If you would invest 54.00 in China Communications Services on December 8, 2024 and sell it today you would earn a total of 2.00 from holding China Communications Services or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Air Canada
Performance |
| Timeline |
| China Communications |
| Air Canada |
China Communications and Air Canada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Air Canada
The main advantage of trading using opposite China Communications and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, Air Canada 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 Canada will offset losses from the drop in Air Canada's long position.| China Communications vs. CREDIT AGRICOLE | ||
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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