Correlation Between Grupo Carso and CHINA SOUTHN

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

By analyzing existing cross correlation between Grupo Carso SAB and CHINA SOUTHN AIR H , you can compare the effects of market volatilities on Grupo Carso and CHINA SOUTHN 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 Grupo Carso with a short position of CHINA SOUTHN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Carso and CHINA SOUTHN.

Diversification Opportunities for Grupo Carso and CHINA SOUTHN

-0.26

Correlation Coefficient

Grupo Carso  CHINA SOUTHN

Very good diversification

The 3 months correlation between Grupo and CHINA is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and CHINA SOUTHN AIR H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SOUTHN AIR and Grupo Carso 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 Grupo Carso SAB are associated (or correlated) with CHINA SOUTHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SOUTHN AIR has no effect on the direction of Grupo Carso i.e., Grupo Carso and CHINA SOUTHN go up and down completely randomly.

Pair Corralation between Grupo Carso and CHINA SOUTHN

Assuming the 90 days horizon Grupo Carso SAB is expected to generate 0.49 times more return on investment than CHINA SOUTHN. However, Grupo Carso SAB is 2.04 times less risky than CHINA SOUTHN. It trades about -0.3 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about -0.17 per unit of risk. If you would invest  550.00  in Grupo Carso SAB on October 11, 2024 and sell it today you would lose (35.00) from holding Grupo Carso SAB or give up 6.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Grupo Carso SAB  vs.  CHINA SOUTHN AIR H

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CHINA SOUTHN AIR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA SOUTHN AIR H are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CHINA SOUTHN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Carso and CHINA SOUTHN

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

The idea behind Grupo Carso SAB and CHINA SOUTHN AIR H 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.