Correlation Between GOLD ROAD and China Eastern
Can any of the company-specific risk be diversified away by investing in both GOLD ROAD and China Eastern 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 GOLD ROAD and China Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOLD ROAD RES and China Eastern Airlines, you can compare the effects of market volatilities on GOLD ROAD and China Eastern 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 GOLD ROAD with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOLD ROAD and China Eastern.
Diversification Opportunities for GOLD ROAD and China Eastern
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GOLD and China is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines and GOLD ROAD 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 GOLD ROAD RES are associated (or correlated) with China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of GOLD ROAD i.e., GOLD ROAD and China Eastern go up and down completely randomly.
Pair Corralation between GOLD ROAD and China Eastern
Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 0.4 times more return on investment than China Eastern. However, GOLD ROAD RES is 2.51 times less risky than China Eastern. It trades about 0.82 of its potential returns per unit of risk. China Eastern Airlines is currently generating about 0.01 per unit of risk. If you would invest 122.00 in GOLD ROAD RES on October 28, 2024 and sell it today you would earn a total of 26.00 from holding GOLD ROAD RES or generate 21.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GOLD ROAD RES vs. China Eastern Airlines
Performance |
| Timeline |
| GOLD ROAD RES |
| China Eastern Airlines |
GOLD ROAD and China Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOLD ROAD and China Eastern
The main advantage of trading using opposite GOLD ROAD and China Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLD ROAD position performs unexpectedly, China Eastern 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 Eastern will offset losses from the drop in China Eastern's long position.| GOLD ROAD vs. ZURICH INSURANCE GROUP | GOLD ROAD vs. EPSILON HEALTHCARE LTD | GOLD ROAD vs. Japan Post Insurance | GOLD ROAD vs. Cardinal Health |
| China Eastern vs. Delta Air Lines | China Eastern vs. Air China Limited | China Eastern vs. AIR CHINA LTD | China Eastern vs. RYANAIR HLDGS ADR |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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