Correlation Between South West and China Southern

Can any of the company-specific risk be diversified away by investing in both South West 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 South West and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between South West Pinnacle and China Southern Airlines, you can compare the effects of market volatilities on South West 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 South West with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of South West and China Southern.

Diversification Opportunities for South West and China Southern

-0.57

Correlation Coefficient

South West  China Southern

Excellent diversification

The 3 months correlation between South and China is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding South West Pinnacle 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 South West 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 South West Pinnacle 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 South West i.e., South West and China Southern go up and down completely randomly.

Pair Corralation between South West and China Southern

If you would invest  3,697  in China Southern Airlines on February 6, 2024 and sell it today you would earn a total of  0.00  from holding China Southern Airlines or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	5.56%
Values	Daily Returns

South West Pinnacle  vs.  China Southern Airlines

South West Pinnacle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South West Pinnacle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

China Southern Airlines

Risk-Adjusted Performance

0 of 100

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with South West and China Southern

The main advantage of trading using opposite South West and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South West 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 South West Pinnacle 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.