Correlation Between China Airlines and BES Engineering
Can any of the company-specific risk be diversified away by investing in both China Airlines and BES Engineering 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 BES Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Airlines and BES Engineering Co, you can compare the effects of market volatilities on China Airlines and BES Engineering 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 BES Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and BES Engineering.
Diversification Opportunities for China Airlines and BES Engineering
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and BES is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and BES Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BES Engineering 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 BES Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BES Engineering has no effect on the direction of China Airlines i.e., China Airlines and BES Engineering go up and down completely randomly.
Pair Corralation between China Airlines and BES Engineering
Assuming the 90 days trading horizon China Airlines is expected to generate 0.84 times more return on investment than BES Engineering. However, China Airlines is 1.19 times less risky than BES Engineering. It trades about 0.06 of its potential returns per unit of risk. BES Engineering Co is currently generating about -0.06 per unit of risk. If you would invest 1,945 in China Airlines on December 5, 2024 and sell it today you would earn a total of 435.00 from holding China Airlines or generate 22.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
China Airlines vs. BES Engineering Co
Performance |
Timeline |
China Airlines |
BES Engineering |
China Airlines and BES Engineering Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Airlines and BES Engineering
The main advantage of trading using opposite China Airlines and BES Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Airlines position performs unexpectedly, BES Engineering 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 BES Engineering will offset losses from the drop in BES Engineering's long position.China Airlines vs. Eva Airways Corp | China Airlines vs. Evergreen Marine Corp | China Airlines vs. Yang Ming Marine | China Airlines vs. China Steel Corp |
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Check out your portfolio center.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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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