Correlation Between CREO MEDICAL and Air China

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

By analyzing existing cross correlation between CREO MEDICAL GRP and Air China Limited, you can compare the effects of market volatilities on CREO MEDICAL and Air China 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 CREO MEDICAL with a short position of Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of CREO MEDICAL and Air China.

Diversification Opportunities for CREO MEDICAL and Air China

-0.73

Correlation Coefficient

CREO MEDICAL  Air China

Pay attention - limited upside

The 3 months correlation between CREO and Air is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding CREO MEDICAL GRP and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited and CREO MEDICAL 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 CREO MEDICAL GRP are associated (or correlated) with Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of CREO MEDICAL i.e., CREO MEDICAL and Air China go up and down completely randomly.

Pair Corralation between CREO MEDICAL and Air China

Assuming the 90 days horizon CREO MEDICAL GRP is expected to generate 1.77 times more return on investment than Air China. However, CREO MEDICAL is 1.77 times more volatile than Air China Limited. It trades about 0.33 of its potential returns per unit of risk. Air China Limited is currently generating about -0.15 per unit of risk. If you would invest  16.00  in CREO MEDICAL GRP on October 10, 2024 and sell it today you would earn a total of  6.00  from holding CREO MEDICAL GRP or generate 37.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CREO MEDICAL GRP  vs.  Air China Limited

CREO MEDICAL GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CREO MEDICAL GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Air China Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Air China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CREO MEDICAL and Air China

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

The idea behind CREO MEDICAL GRP and Air China Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .