Correlation Between China Southern and China Eastern
Can any of the company-specific risk be diversified away by investing in both China Southern 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 China Southern and China Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Southern Airlines and China Eastern Airlines, you can compare the effects of market volatilities on China Southern 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 China Southern with a short position of China Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and China Eastern.
Diversification Opportunities for China Southern and China Eastern
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and China is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines 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 China Southern 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 Southern Airlines 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 China Southern i.e., China Southern and China Eastern go up and down completely randomly.
Pair Corralation between China Southern and China Eastern
Considering the 90-day investment horizon China Southern Airlines is expected to generate 1.09 times more return on investment than China Eastern. However, China Southern is 1.09 times more volatile than China Eastern Airlines. It trades about 0.07 of its potential returns per unit of risk. China Eastern Airlines is currently generating about 0.04 per unit of risk. If you would invest 2,703 in China Southern Airlines on January 19, 2024 and sell it today you would earn a total of 994.00 from holding China Southern Airlines or generate 36.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.3% |
| Values | Daily Returns |
China Southern Airlines vs. China Eastern Airlines
Performance |
| Timeline |
| China Southern Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| China Eastern Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Southern and China Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Southern and China Eastern
The main advantage of trading using opposite China Southern and China Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern 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.| China Southern vs. Precision Drilling | China Southern vs. KNOT Offshore Partners | China Southern vs. Shelf Drilling | China Southern vs. AKITA Drilling |
| China Eastern vs. Scandinavian Tobacco Group | China Eastern vs. Westrock Coffee | China Eastern vs. Fidus Investment Corp | China Eastern vs. SWK Holdings Corp |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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