Correlation Between Aeries Technology and China Southern

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

By analyzing existing cross correlation between Aeries Technology and China Southern Airlines, you can compare the effects of market volatilities on Aeries Technology and China Southern 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 Aeries Technology with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeries Technology and China Southern.

Diversification Opportunities for Aeries Technology and China Southern

0.43

Correlation Coefficient

Aeries Technology  China Southern

Very weak diversification

The 3 months correlation between Aeries and China is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aeries Technology and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines and Aeries Technology 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 Aeries Technology are associated (or correlated) with China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Aeries Technology i.e., Aeries Technology and China Southern go up and down completely randomly.

Pair Corralation between Aeries Technology and China Southern

Assuming the 90 days horizon Aeries Technology is expected to generate 5.72 times more return on investment than China Southern. However, Aeries Technology is 5.72 times more volatile than China Southern Airlines. It trades about 0.08 of its potential returns per unit of risk. China Southern Airlines is currently generating about 0.0 per unit of risk. If you would invest  13.00  in Aeries Technology on October 11, 2024 and sell it today you would lose (7.12) from holding Aeries Technology or give up 54.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	24.65%
Values	Daily Returns

Aeries Technology  vs.  China Southern Airlines

Aeries Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aeries Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Aeries Technology showed solid returns over the last few months and may actually be approaching a breakup point.

China Southern Airlines

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Aeries Technology and China Southern

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

The idea behind Aeries Technology and China Southern Airlines 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 Transaction History module to view history of all your transactions and understand their impact on performance.