Correlation Between ECD Automotive and China Southern
Can any of the company-specific risk be diversified away by investing in both ECD Automotive and China Southern 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 ECD Automotive and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECD Automotive Design and China Southern Airlines, you can compare the effects of market volatilities on ECD Automotive and China Southern 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 ECD Automotive with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and China Southern.
Diversification Opportunities for ECD Automotive and China Southern
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ECD and China is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines and ECD Automotive 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 ECD Automotive Design are associated (or correlated) with China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of ECD Automotive i.e., ECD Automotive and China Southern go up and down completely randomly.
Pair Corralation between ECD Automotive and China Southern
Assuming the 90 days horizon ECD Automotive Design is expected to generate 9.15 times more return on investment than China Southern. However, ECD Automotive is 9.15 times more volatile than China Southern Airlines. It trades about 0.36 of its potential returns per unit of risk. China Southern Airlines is currently generating about -0.24 per unit of risk. If you would invest 1.51 in ECD Automotive Design on November 3, 2024 and sell it today you would earn a total of 0.98 from holding ECD Automotive Design or generate 64.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 33.33% |
| Values | Daily Returns |
ECD Automotive Design vs. China Southern Airlines
Performance |
| Timeline |
| ECD Automotive Design |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| China Southern Airlines |
ECD Automotive and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECD Automotive and China Southern
The main advantage of trading using opposite ECD Automotive and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive position performs unexpectedly, China Southern 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 Southern will offset losses from the drop in China Southern's long position.| ECD Automotive vs. Alta Equipment Group | ECD Automotive vs. McGrath RentCorp | ECD Automotive vs. Vestis | ECD Automotive vs. Tower Semiconductor |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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