Correlation Between China Aircraft and Steven Madden
Can any of the company-specific risk be diversified away by investing in both China Aircraft and Steven Madden 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 Steven Madden 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 Steven Madden, you can compare the effects of market volatilities on China Aircraft and Steven Madden 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 Steven Madden. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Aircraft and Steven Madden.
Diversification Opportunities for China Aircraft and Steven Madden
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Steven is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of China Aircraft i.e., China Aircraft and Steven Madden go up and down completely randomly.
Pair Corralation between China Aircraft and Steven Madden
Assuming the 90 days horizon China Aircraft Leasing is expected to under-perform the Steven Madden. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Aircraft Leasing is 1.98 times less risky than Steven Madden. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Steven Madden is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 4,554 in Steven Madden on September 15, 2024 and sell it today you would lose (187.00) from holding Steven Madden or give up 4.11% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
China Aircraft Leasing vs. Steven Madden
Performance |
Timeline |
China Aircraft Leasing |
Steven Madden |
China Aircraft and Steven Madden Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Aircraft and Steven Madden
The main advantage of trading using opposite China Aircraft and Steven Madden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft position performs unexpectedly, Steven Madden 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 Steven Madden will offset losses from the drop in Steven Madden's long position.China Aircraft vs. United Rentals | China Aircraft vs. Ashtead Gro | China Aircraft vs. AerCap Holdings NV | China Aircraft vs. Fortress Transp Infra |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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