Correlation Between China Southern and MYT Netherlands

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

Diversification Opportunities for China Southern and MYT Netherlands

0.1

Correlation Coefficient

China Southern  MYT Netherlands

Average diversification

The 3 months correlation between China and MYT is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and MYT Netherlands Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYT Netherlands Parent 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 MYT Netherlands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYT Netherlands Parent has no effect on the direction of China Southern i.e., China Southern and MYT Netherlands go up and down completely randomly.

Pair Corralation between China Southern and MYT Netherlands

Assuming the 90 days horizon China Southern Airlines is expected to generate 0.98 times more return on investment than MYT Netherlands. However, China Southern Airlines is 1.02 times less risky than MYT Netherlands. It trades about 0.1 of its potential returns per unit of risk. MYT Netherlands Parent is currently generating about -0.01 per unit of risk. If you would invest  44.00  in China Southern Airlines on October 8, 2024 and sell it today you would earn a total of  10.00  from holding China Southern Airlines or generate 22.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Southern Airlines  vs.  MYT Netherlands Parent

China Southern Airlines

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Southern Airlines are ranked lower than 8 (%) 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.

MYT Netherlands Parent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MYT Netherlands Parent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MYT Netherlands is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with China Southern and MYT Netherlands

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

The idea behind China Southern Airlines and MYT Netherlands Parent 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.