Correlation Between China Southern and Delta Air

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Can any of the company-specific risk be diversified away by investing in both China Southern and Delta Air 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 Delta Air 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 Delta Air Lines, you can compare the effects of market volatilities on China Southern and Delta Air 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 Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and Delta Air.

Diversification Opportunities for China Southern and Delta Air

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between China and Delta is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines 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 Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of China Southern i.e., China Southern and Delta Air go up and down completely randomly.

Pair Corralation between China Southern and Delta Air

Considering the 90-day investment horizon China Southern Airlines is expected to generate 1.1 times more return on investment than Delta Air. However, China Southern is 1.1 times more volatile than Delta Air Lines. It trades about 0.06 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.04 per unit of risk. If you would invest  2,845  in China Southern Airlines on December 29, 2023 and sell it today you would earn a total of  852.00  from holding China Southern Airlines or generate 29.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy46.06%
ValuesDaily Returns

China Southern Airlines  vs.  Delta Air Lines

 Performance 
       Timeline  
China Southern Airlines 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days China Southern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, China Southern is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
Delta Air Lines 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

China Southern and Delta Air Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Southern and Delta Air

The main advantage of trading using opposite China Southern and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern position performs unexpectedly, Delta Air 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 Delta Air will offset losses from the drop in Delta Air's long position.
The idea behind China Southern Airlines and Delta Air Lines 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.
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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