Correlation Between China Airlines and Cameo Communications
Can any of the company-specific risk be diversified away by investing in both China Airlines and Cameo Communications 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 Cameo Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Airlines and Cameo Communications, you can compare the effects of market volatilities on China Airlines and Cameo Communications 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 Cameo Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and Cameo Communications.
Diversification Opportunities for China Airlines and Cameo Communications
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Cameo is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and Cameo Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cameo Communications 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 Cameo Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cameo Communications has no effect on the direction of China Airlines i.e., China Airlines and Cameo Communications go up and down completely randomly.
Pair Corralation between China Airlines and Cameo Communications
Assuming the 90 days trading horizon China Airlines is expected to generate 0.8 times more return on investment than Cameo Communications. However, China Airlines is 1.25 times less risky than Cameo Communications. It trades about 0.05 of its potential returns per unit of risk. Cameo Communications is currently generating about 0.03 per unit of risk. If you would invest 1,890 in China Airlines on September 21, 2024 and sell it today you would earn a total of 720.00 from holding China Airlines or generate 38.1% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
China Airlines vs. Cameo Communications
Performance |
Timeline |
China Airlines |
Cameo Communications |
China Airlines and Cameo Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Airlines and Cameo Communications
The main advantage of trading using opposite China Airlines and Cameo Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Airlines position performs unexpectedly, Cameo Communications 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 Cameo Communications will offset losses from the drop in Cameo Communications' long position.China Airlines vs. Evergreen Marine Corp | China Airlines vs. Yang Ming Marine | China Airlines vs. China Steel Corp | China Airlines vs. Cathay Financial Holding |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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