Correlation Between China Aircraft and KWG Group

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

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

Diversification Opportunities for China Aircraft and KWG Group

-0.07

Correlation Coefficient

China Aircraft  KWG Group

Good diversification

The 3 months correlation between China and KWG is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and KWG Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWG Group Holdings and China Aircraft 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 China Aircraft Leasing are associated (or correlated) with KWG Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWG Group Holdings has no effect on the direction of China Aircraft i.e., China Aircraft and KWG Group go up and down completely randomly.

Pair Corralation between China Aircraft and KWG Group

If you would invest  40.00  in China Aircraft Leasing on December 27, 2024 and sell it today you would earn a total of  7.00  from holding China Aircraft Leasing or generate 17.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

China Aircraft Leasing  vs.  KWG Group Holdings

China Aircraft Leasing

Risk-Adjusted Performance

OK

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

KWG Group Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with China Aircraft and KWG Group

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

The idea behind China Aircraft Leasing and KWG Group Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .