Correlation Between China Airlines and Awea Mechantronic

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

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

Diversification Opportunities for China Airlines and Awea Mechantronic

-0.82

Correlation Coefficient

China Airlines  Awea Mechantronic

Pay attention - limited upside

The 3 months correlation between China and Awea is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and Awea Mechantronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awea Mechantronic and China Airlines 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 Airlines are associated (or correlated) with Awea Mechantronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awea Mechantronic has no effect on the direction of China Airlines i.e., China Airlines and Awea Mechantronic go up and down completely randomly.

Pair Corralation between China Airlines and Awea Mechantronic

Assuming the 90 days trading horizon China Airlines is expected to generate 2.05 times more return on investment than Awea Mechantronic. However, China Airlines is 2.05 times more volatile than Awea Mechantronic Co. It trades about 0.26 of its potential returns per unit of risk. Awea Mechantronic Co is currently generating about -0.12 per unit of risk. If you would invest  2,345  in China Airlines on September 15, 2024 and sell it today you would earn a total of  255.00  from holding China Airlines or generate 10.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

China Airlines  vs.  Awea Mechantronic Co

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.

Awea Mechantronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awea Mechantronic Co 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.

Pair Trading with China Airlines and Awea Mechantronic

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

The idea behind China Airlines and Awea Mechantronic Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.