Correlation Between China Southern and Aeries Technology

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

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

Diversification Opportunities for China Southern and Aeries Technology

0.46

Correlation Coefficient

China Southern  Aeries Technology

Very weak diversification

The 3 months correlation between China and Aeries is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Aeries Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeries Technology and China Southern 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 Southern Airlines are associated (or correlated) with Aeries Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeries Technology has no effect on the direction of China Southern i.e., China Southern and Aeries Technology go up and down completely randomly.

Pair Corralation between China Southern and Aeries Technology

Assuming the 90 days horizon China Southern Airlines is expected to under-perform the Aeries Technology. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Southern Airlines is 15.66 times less risky than Aeries Technology. The pink sheet trades about -0.25 of its potential returns per unit of risk. The Aeries Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3.44  in Aeries Technology on October 26, 2024 and sell it today you would lose (1.33) from holding Aeries Technology or give up 38.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.78%
Values	Daily Returns

China Southern Airlines  vs.  Aeries Technology

China Southern Airlines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Southern Airlines are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, China Southern reported solid returns over the last few months and may actually be approaching a breakup point.

Aeries Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aeries Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Aeries Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Southern and Aeries Technology

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

The idea behind China Southern Airlines and Aeries Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.