Correlation Between Air China and El Al

Can any of the company-specific risk be diversified away by investing in both Air China and El Al 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 El Al 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 El Al Israel, you can compare the effects of market volatilities on Air China and El Al 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 El Al. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and El Al.

Diversification Opportunities for Air China and El Al

-0.3

Correlation Coefficient

Air China  El Al

Very good diversification

The 3 months correlation between Air and ELALF is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and El Al Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Al Israel 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 El Al. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Al Israel has no effect on the direction of Air China i.e., Air China and El Al go up and down completely randomly.

Pair Corralation between Air China and El Al

Assuming the 90 days horizon Air China is expected to generate 3.09 times less return on investment than El Al. In addition to that, Air China is 1.52 times more volatile than El Al Israel. It trades about 0.03 of its total potential returns per unit of risk. El Al Israel is currently generating about 0.14 per unit of volatility. If you would invest  225.00  in El Al Israel on December 19, 2024 and sell it today you would earn a total of  45.00  from holding El Al Israel or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Air China Ltd  vs.  El Al Israel

Air China

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Air China may actually be approaching a critical reversion point that can send shares even higher in April 2025.

El Al Israel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in El Al Israel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, El Al reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air China and El Al

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

The idea behind Air China Ltd and El Al Israel 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.