Correlation Between CSBC Corp and China Airlines

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

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

Diversification Opportunities for CSBC Corp and China Airlines

-0.78

Correlation Coefficient

CSBC Corp  China Airlines

Pay attention - limited upside

The 3 months correlation between CSBC and China is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding CSBC Corp Taiwan and China Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Airlines and CSBC Corp 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 CSBC Corp Taiwan are associated (or correlated) with China Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Airlines has no effect on the direction of CSBC Corp i.e., CSBC Corp and China Airlines go up and down completely randomly.

Pair Corralation between CSBC Corp and China Airlines

Assuming the 90 days trading horizon CSBC Corp Taiwan is expected to under-perform the China Airlines. But the stock apears to be less risky and, when comparing its historical volatility, CSBC Corp Taiwan is 1.26 times less risky than China Airlines. The stock trades about -0.12 of its potential returns per unit of risk. The China Airlines is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,065  in China Airlines on September 16, 2024 and sell it today you would earn a total of  535.00  from holding China Airlines or generate 25.91% return on investment over 90 days.

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

CSBC Corp Taiwan  vs.  China Airlines

CSBC Corp Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSBC Corp Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

China Airlines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Airlines are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSBC Corp and China Airlines

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

The idea behind CSBC Corp Taiwan and China 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 Commodity Directory module to find actively traded commodities issued by global exchanges.