Correlation Between China Airlines and Tainet Communication

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

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

Diversification Opportunities for China Airlines and Tainet Communication

-0.86

Correlation Coefficient

China Airlines  Tainet Communication

Pay attention - limited upside

The 3 months correlation between China and Tainet is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and Tainet Communication System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainet Communication 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 Tainet Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainet Communication has no effect on the direction of China Airlines i.e., China Airlines and Tainet Communication go up and down completely randomly.

Pair Corralation between China Airlines and Tainet Communication

Assuming the 90 days trading horizon China Airlines is expected to generate 1.4 times more return on investment than Tainet Communication. However, China Airlines is 1.4 times more volatile than Tainet Communication System. It trades about -0.08 of its potential returns per unit of risk. Tainet Communication System is currently generating about -0.15 per unit of risk. If you would invest  2,695  in China Airlines on October 9, 2024 and sell it today you would lose (75.00) from holding China Airlines or give up 2.78% of portfolio value over 90 days.

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

China Airlines  vs.  Tainet Communication System

China Airlines

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Airlines are ranked lower than 20 (%) 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.

Tainet Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tainet Communication System has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with China Airlines and Tainet Communication

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

The idea behind China Airlines and Tainet Communication System 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.