Correlation Between China Southern and Compania Cervecerias

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

Diversification Opportunities for China Southern and Compania Cervecerias

-0.43

Correlation Coefficient

China Southern  Compania Cervecerias

Very good diversification

The 3 months correlation between China and Compania is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias 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 Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of China Southern i.e., China Southern and Compania Cervecerias go up and down completely randomly.

Pair Corralation between China Southern and Compania Cervecerias

Assuming the 90 days horizon China Southern Airlines is expected to under-perform the Compania Cervecerias. In addition to that, China Southern is 1.63 times more volatile than Compania Cervecerias Unidas. It trades about -0.18 of its total potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.31 per unit of volatility. If you would invest  1,167  in Compania Cervecerias Unidas on December 20, 2024 and sell it today you would earn a total of  344.00  from holding Compania Cervecerias Unidas or generate 29.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.67%
Values	Daily Returns

China Southern Airlines  vs.  Compania Cervecerias Unidas

China Southern Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Southern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Compania Cervecerias

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Southern and Compania Cervecerias

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

The idea behind China Southern Airlines and Compania Cervecerias Unidas 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.