Correlation Between Airbus SE and China Datang

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

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

Diversification Opportunities for Airbus SE and China Datang

0.62

Correlation Coefficient

Airbus SE  China Datang

Poor diversification

The 3 months correlation between Airbus and China is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Airbus SE and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Datang and Airbus SE 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 Airbus SE are associated (or correlated) with China Datang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Datang has no effect on the direction of Airbus SE i.e., Airbus SE and China Datang go up and down completely randomly.

Pair Corralation between Airbus SE and China Datang

Assuming the 90 days trading horizon Airbus SE is expected to generate 0.42 times more return on investment than China Datang. However, Airbus SE is 2.37 times less risky than China Datang. It trades about 0.36 of its potential returns per unit of risk. China Datang is currently generating about 0.01 per unit of risk. If you would invest  15,310  in Airbus SE on October 25, 2024 and sell it today you would earn a total of  1,030  from holding Airbus SE or generate 6.73% return on investment over 90 days.

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

Airbus SE  vs.  China Datang

Airbus SE

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Airbus SE sustained solid returns over the last few months and may actually be approaching a breakup point.

China Datang

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Datang are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Datang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Airbus SE and China Datang

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

The idea behind Airbus SE and China Datang 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.