Correlation Between China Aircraft and Solventum Corp

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

Diversification Opportunities for China Aircraft and Solventum Corp

-0.48

Correlation Coefficient

China Aircraft  Solventum Corp

Very good diversification

The 3 months correlation between China and Solventum is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and Solventum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solventum Corp 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 Solventum Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solventum Corp has no effect on the direction of China Aircraft i.e., China Aircraft and Solventum Corp go up and down completely randomly.

Pair Corralation between China Aircraft and Solventum Corp

Assuming the 90 days horizon China Aircraft Leasing is expected to under-perform the Solventum Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Aircraft Leasing is 1.65 times less risky than Solventum Corp. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Solventum Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,179  in Solventum Corp on September 14, 2024 and sell it today you would lose (225.00) from holding Solventum Corp or give up 3.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

China Aircraft Leasing  vs.  Solventum Corp

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Solventum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solventum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solventum Corp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Aircraft and Solventum Corp

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

The idea behind China Aircraft Leasing and Solventum Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.