Correlation Between China Resources and Air China
Can any of the company-specific risk be diversified away by investing in both China Resources and Air China 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 Resources and Air China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and Air China Ltd, you can compare the effects of market volatilities on China Resources and Air China 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 Resources with a short position of Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Air China.
Diversification Opportunities for China Resources and Air China
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Air is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Air China Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China and China Resources 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 Resources Beer are associated (or correlated) with Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China has no effect on the direction of China Resources i.e., China Resources and Air China go up and down completely randomly.
Pair Corralation between China Resources and Air China
Assuming the 90 days horizon China Resources is expected to generate 1.96 times less return on investment than Air China. In addition to that, China Resources is 1.16 times more volatile than Air China Ltd. It trades about 0.01 of its total potential returns per unit of risk. Air China Ltd is currently generating about 0.02 per unit of volatility. If you would invest 1,205 in Air China Ltd on August 28, 2024 and sell it today you would earn a total of 45.00 from holding Air China Ltd or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Air China Ltd
Performance |
| Timeline |
| China Resources Beer |
| Air China |
China Resources and Air China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Air China
The main advantage of trading using opposite China Resources and Air China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Air China 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 China will offset losses from the drop in Air China's long position.| China Resources vs. Budweiser Brewing | China Resources vs. Anheuser Busch InBev SANV | China Resources vs. Anheuser Busch Inbev | China Resources vs. Molson Coors Brewing |
| Air China vs. Singapore Airlines | Air China vs. Singapore Airlines | Air China vs. Qantas Airways Ltd | Air China vs. Copa Holdings SA |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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