Correlation Between Eva Airways and CHINA DEVELOPMENT

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

By analyzing existing cross correlation between Eva Airways Corp and CHINA DEVELOPMENT FINANCIAL, you can compare the effects of market volatilities on Eva Airways and CHINA DEVELOPMENT 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 Eva Airways with a short position of CHINA DEVELOPMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eva Airways and CHINA DEVELOPMENT.

Diversification Opportunities for Eva Airways and CHINA DEVELOPMENT

0.69

Correlation Coefficient

Eva Airways  CHINA DEVELOPMENT

Poor diversification

The 3 months correlation between Eva and CHINA is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eva Airways Corp and CHINA DEVELOPMENT FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA DEVELOPMENT and Eva Airways 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 Eva Airways Corp are associated (or correlated) with CHINA DEVELOPMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA DEVELOPMENT has no effect on the direction of Eva Airways i.e., Eva Airways and CHINA DEVELOPMENT go up and down completely randomly.

Pair Corralation between Eva Airways and CHINA DEVELOPMENT

Assuming the 90 days trading horizon Eva Airways Corp is expected to generate 9.67 times more return on investment than CHINA DEVELOPMENT. However, Eva Airways is 9.67 times more volatile than CHINA DEVELOPMENT FINANCIAL. It trades about 0.13 of its potential returns per unit of risk. CHINA DEVELOPMENT FINANCIAL is currently generating about 0.33 per unit of risk. If you would invest  4,350  in Eva Airways Corp on October 1, 2024 and sell it today you would earn a total of  220.00  from holding Eva Airways Corp or generate 5.06% return on investment over 90 days.

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

Eva Airways Corp  vs.  CHINA DEVELOPMENT FINANCIAL

Eva Airways Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eva Airways Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eva Airways showed solid returns over the last few months and may actually be approaching a breakup point.

CHINA DEVELOPMENT

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA DEVELOPMENT FINANCIAL are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CHINA DEVELOPMENT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eva Airways and CHINA DEVELOPMENT

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

The idea behind Eva Airways Corp and CHINA DEVELOPMENT FINANCIAL 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.