Correlation Between CHINA SOUTHN and CDN IMPERIAL
Can any of the company-specific risk be diversified away by investing in both CHINA SOUTHN and CDN IMPERIAL 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 CHINA SOUTHN and CDN IMPERIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA SOUTHN AIR H and CDN IMPERIAL BANK, you can compare the effects of market volatilities on CHINA SOUTHN and CDN IMPERIAL 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 CHINA SOUTHN with a short position of CDN IMPERIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA SOUTHN and CDN IMPERIAL.
Diversification Opportunities for CHINA SOUTHN and CDN IMPERIAL
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CHINA and CDN is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK and CHINA SOUTHN 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 CHINA SOUTHN AIR H are associated (or correlated) with CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of CHINA SOUTHN i.e., CHINA SOUTHN and CDN IMPERIAL go up and down completely randomly.
Pair Corralation between CHINA SOUTHN and CDN IMPERIAL
Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to under-perform the CDN IMPERIAL. In addition to that, CHINA SOUTHN is 2.5 times more volatile than CDN IMPERIAL BANK. It trades about -0.22 of its total potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about -0.06 per unit of volatility. If you would invest 6,159 in CDN IMPERIAL BANK on October 14, 2024 and sell it today you would lose (69.00) from holding CDN IMPERIAL BANK or give up 1.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA SOUTHN AIR H vs. CDN IMPERIAL BANK
Performance |
| Timeline |
| CHINA SOUTHN AIR |
| CDN IMPERIAL BANK |
CHINA SOUTHN and CDN IMPERIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA SOUTHN and CDN IMPERIAL
The main advantage of trading using opposite CHINA SOUTHN and CDN IMPERIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN position performs unexpectedly, CDN IMPERIAL 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 CDN IMPERIAL will offset losses from the drop in CDN IMPERIAL's long position.| CHINA SOUTHN vs. Fukuyama Transporting Co | CHINA SOUTHN vs. Gaztransport Technigaz SA | CHINA SOUTHN vs. USWE SPORTS AB | CHINA SOUTHN vs. FAST RETAIL ADR |
| CDN IMPERIAL vs. JAPAN TOBACCO UNSPADR12 | CDN IMPERIAL vs. Wizz Air Holdings | CDN IMPERIAL vs. WT OFFSHORE | CDN IMPERIAL vs. CHINA SOUTHN AIR H |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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