Correlation Between China Airlines and China Container

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

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

Diversification Opportunities for China Airlines and China Container

0.24

Correlation Coefficient

China Airlines  China Container

Modest diversification

The 3 months correlation between China and China is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and China Container Terminal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Container Terminal 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 China Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Container Terminal has no effect on the direction of China Airlines i.e., China Airlines and China Container go up and down completely randomly.

Pair Corralation between China Airlines and China Container

Assuming the 90 days trading horizon China Airlines is expected to under-perform the China Container. But the stock apears to be less risky and, when comparing its historical volatility, China Airlines is 1.02 times less risky than China Container. The stock trades about -0.1 of its potential returns per unit of risk. The China Container Terminal is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,405  in China Container Terminal on December 27, 2024 and sell it today you would lose (170.00) from holding China Container Terminal or give up 4.99% of portfolio value over 90 days.

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

China Airlines  vs.  China Container Terminal

China Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Airlines 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 Container Terminal

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Container Terminal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Container is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Airlines and China Container

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

The idea behind China Airlines and China Container Terminal 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.