Correlation Between Air China and Guangdong Silvere

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

By analyzing existing cross correlation between Air China Ltd and Guangdong Silvere Sci, you can compare the effects of market volatilities on Air China and Guangdong Silvere 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 Air China with a short position of Guangdong Silvere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Guangdong Silvere.

Diversification Opportunities for Air China and Guangdong Silvere

-0.45

Correlation Coefficient

Air China  Guangdong Silvere

Very good diversification

The 3 months correlation between Air and Guangdong is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and Guangdong Silvere Sci in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Silvere Sci and Air China 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 Air China Ltd are associated (or correlated) with Guangdong Silvere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Silvere Sci has no effect on the direction of Air China i.e., Air China and Guangdong Silvere go up and down completely randomly.

Pair Corralation between Air China and Guangdong Silvere

Assuming the 90 days trading horizon Air China Ltd is expected to under-perform the Guangdong Silvere. But the stock apears to be less risky and, when comparing its historical volatility, Air China Ltd is 1.55 times less risky than Guangdong Silvere. The stock trades about -0.08 of its potential returns per unit of risk. The Guangdong Silvere Sci is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  614.00  in Guangdong Silvere Sci on December 30, 2024 and sell it today you would earn a total of  187.00  from holding Guangdong Silvere Sci or generate 30.46% return on investment over 90 days.

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

Air China Ltd  vs.  Guangdong Silvere Sci

Air China

Risk-Adjusted Performance

Very Weak

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

Guangdong Silvere Sci

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Silvere Sci are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Silvere sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air China and Guangdong Silvere

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

The idea behind Air China Ltd and Guangdong Silvere Sci 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.