Correlation Between ASPEN TECHINC and China Southern
Can any of the company-specific risk be diversified away by investing in both ASPEN TECHINC 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 ASPEN TECHINC and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASPEN TECHINC DL and China Southern Airlines, you can compare the effects of market volatilities on ASPEN TECHINC 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 ASPEN TECHINC with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASPEN TECHINC and China Southern.
Diversification Opportunities for ASPEN TECHINC and China Southern
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ASPEN and China is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN TECHINC DL 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 ASPEN TECHINC 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 ASPEN TECHINC DL 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 ASPEN TECHINC i.e., ASPEN TECHINC and China Southern go up and down completely randomly.
Pair Corralation between ASPEN TECHINC and China Southern
Assuming the 90 days horizon ASPEN TECHINC is expected to generate 2.12 times less return on investment than China Southern. In addition to that, ASPEN TECHINC is 1.16 times more volatile than China Southern Airlines. It trades about 0.21 of its total potential returns per unit of risk. China Southern Airlines is currently generating about 0.51 per unit of volatility. If you would invest 38.00 in China Southern Airlines on August 30, 2024 and sell it today you would earn a total of 8.00 from holding China Southern Airlines or generate 21.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASPEN TECHINC DL vs. China Southern Airlines
Performance |
| Timeline |
| ASPEN TECHINC DL |
| China Southern Airlines |
ASPEN TECHINC and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASPEN TECHINC and China Southern
The main advantage of trading using opposite ASPEN TECHINC and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASPEN TECHINC 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.The idea behind ASPEN TECHINC DL and China Southern Airlines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Southern vs. Ryanair Holdings plc | China Southern vs. Superior Plus Corp | China Southern vs. NMI Holdings | China Southern vs. Origin Agritech |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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