Correlation Between Canadian Utilities and CHINA SOUTHN
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and CHINA SOUTHN 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 Canadian Utilities and CHINA SOUTHN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and CHINA SOUTHN AIR H , you can compare the effects of market volatilities on Canadian Utilities and CHINA SOUTHN 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 Canadian Utilities with a short position of CHINA SOUTHN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and CHINA SOUTHN.
Diversification Opportunities for Canadian Utilities and CHINA SOUTHN
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Canadian and CHINA is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and CHINA SOUTHN AIR H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SOUTHN AIR and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with CHINA SOUTHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SOUTHN AIR has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and CHINA SOUTHN go up and down completely randomly.
Pair Corralation between Canadian Utilities and CHINA SOUTHN
Assuming the 90 days horizon Canadian Utilities is expected to generate 4.36 times less return on investment than CHINA SOUTHN. But when comparing it to its historical volatility, Canadian Utilities Limited is 3.84 times less risky than CHINA SOUTHN. It trades about 0.07 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 33.00 in CHINA SOUTHN AIR H on November 3, 2024 and sell it today you would earn a total of 12.00 from holding CHINA SOUTHN AIR H or generate 36.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. CHINA SOUTHN AIR H
Performance |
| Timeline |
| Canadian Utilities |
| CHINA SOUTHN AIR |
Canadian Utilities and CHINA SOUTHN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and CHINA SOUTHN
The main advantage of trading using opposite Canadian Utilities and CHINA SOUTHN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, CHINA SOUTHN 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 CHINA SOUTHN will offset losses from the drop in CHINA SOUTHN's long position.| Canadian Utilities vs. Casio Computer CoLtd | Canadian Utilities vs. SBI Insurance Group | Canadian Utilities vs. The Hanover Insurance | Canadian Utilities vs. Singapore Reinsurance |
| CHINA SOUTHN vs. Casio Computer CoLtd | CHINA SOUTHN vs. SINGAPORE AIRLINES | CHINA SOUTHN vs. AECOM TECHNOLOGY | CHINA SOUTHN vs. Kingdee International Software |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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