Correlation Between China Airlines and United Integrated

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

By analyzing existing cross correlation between China Airlines and United Integrated Services, you can compare the effects of market volatilities on China Airlines and United Integrated 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 United Integrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and United Integrated.

Diversification Opportunities for China Airlines and United Integrated

0.95

Correlation Coefficient

China Airlines  United Integrated

Almost no diversification

The 3 months correlation between China and United is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and United Integrated Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Integrated 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 United Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Integrated has no effect on the direction of China Airlines i.e., China Airlines and United Integrated go up and down completely randomly.

Pair Corralation between China Airlines and United Integrated

Assuming the 90 days trading horizon China Airlines is expected to generate 1.79 times less return on investment than United Integrated. But when comparing it to its historical volatility, China Airlines is 1.21 times less risky than United Integrated. It trades about 0.23 of its potential returns per unit of risk. United Integrated Services is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  32,350  in United Integrated Services on September 19, 2024 and sell it today you would earn a total of  15,050  from holding United Integrated Services or generate 46.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

China Airlines  vs.  United Integrated Services

China Airlines

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Airlines are ranked lower than 17 (%) 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.

United Integrated

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Integrated Services are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, United Integrated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Airlines and United Integrated

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

The idea behind China Airlines and United Integrated Services 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.