Correlation Between Air China and ATLANTIC PETROLPF

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

By analyzing existing cross correlation between Air China Limited and ATLANTIC PETROLPF DK, you can compare the effects of market volatilities on Air China and ATLANTIC PETROLPF 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 ATLANTIC PETROLPF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and ATLANTIC PETROLPF.

Diversification Opportunities for Air China and ATLANTIC PETROLPF

-0.46

Correlation Coefficient

Air China  ATLANTIC PETROLPF

Very good diversification

The 3 months correlation between Air and ATLANTIC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and ATLANTIC PETROLPF DK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATLANTIC PETROLPF 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 Limited are associated (or correlated) with ATLANTIC PETROLPF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATLANTIC PETROLPF has no effect on the direction of Air China i.e., Air China and ATLANTIC PETROLPF go up and down completely randomly.

Pair Corralation between Air China and ATLANTIC PETROLPF

Assuming the 90 days horizon Air China is expected to generate 569.91 times less return on investment than ATLANTIC PETROLPF. But when comparing it to its historical volatility, Air China Limited is 2.31 times less risky than ATLANTIC PETROLPF. It trades about 0.0 of its potential returns per unit of risk. ATLANTIC PETROLPF DK is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16.00  in ATLANTIC PETROLPF DK on December 29, 2024 and sell it today you would earn a total of  4.00  from holding ATLANTIC PETROLPF DK or generate 25.0% 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 Limited  vs.  ATLANTIC PETROLPF DK

Air China Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air China Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ATLANTIC PETROLPF

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATLANTIC PETROLPF DK are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ATLANTIC PETROLPF reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air China and ATLANTIC PETROLPF

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

The idea behind Air China Limited and ATLANTIC PETROLPF DK 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.