Correlation Between EasyJet Plc and China Southern
Can any of the company-specific risk be diversified away by investing in both EasyJet Plc 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 EasyJet Plc and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between easyJet plc and China Southern Airlines, you can compare the effects of market volatilities on EasyJet Plc 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 EasyJet Plc with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of EasyJet Plc and China Southern.
Diversification Opportunities for EasyJet Plc and China Southern
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EasyJet and China is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding easyJet plc 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 EasyJet Plc 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 easyJet plc 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 EasyJet Plc i.e., EasyJet Plc and China Southern go up and down completely randomly.
Pair Corralation between EasyJet Plc and China Southern
Assuming the 90 days horizon easyJet plc is expected to under-perform the China Southern. But the otc stock apears to be less risky and, when comparing its historical volatility, easyJet plc is 2.04 times less risky than China Southern. The otc stock trades about -0.22 of its potential returns per unit of risk. The China Southern Airlines is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 37.00 in China Southern Airlines on August 24, 2024 and sell it today you would earn a total of 7.00 from holding China Southern Airlines or generate 18.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
easyJet plc vs. China Southern Airlines
Performance |
| Timeline |
| easyJet plc |
| China Southern Airlines |
EasyJet Plc and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EasyJet Plc and China Southern
The main advantage of trading using opposite EasyJet Plc and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EasyJet Plc 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.| EasyJet Plc vs. Finnair Oyj | EasyJet Plc vs. Norse Atlantic ASA | EasyJet Plc vs. Air New Zealand | EasyJet Plc vs. Air China Limited |
| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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