Correlation Between Kolibri Global and China Southern

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

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

Diversification Opportunities for Kolibri Global and China Southern

0.85

Correlation Coefficient

Kolibri Global  China Southern

Very poor diversification

The 3 months correlation between Kolibri and China is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kolibri Global Energy and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines and Kolibri Global 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 Kolibri Global Energy are associated (or correlated) with China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Kolibri Global i.e., Kolibri Global and China Southern go up and down completely randomly.

Pair Corralation between Kolibri Global and China Southern

Given the investment horizon of 90 days Kolibri Global Energy is expected to generate 1.12 times more return on investment than China Southern. However, Kolibri Global is 1.12 times more volatile than China Southern Airlines. It trades about 0.31 of its potential returns per unit of risk. China Southern Airlines is currently generating about -0.18 per unit of risk. If you would invest  466.00  in Kolibri Global Energy on October 11, 2024 and sell it today you would earn a total of  132.00  from holding Kolibri Global Energy or generate 28.33% return on investment over 90 days.

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

Kolibri Global Energy  vs.  China Southern Airlines

Kolibri Global Energy

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kolibri Global Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, Kolibri Global demonstrated solid returns over the last few months and may actually be approaching a breakup point.

China Southern Airlines

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Southern Airlines are ranked lower than 6 (%) 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.

Pair Trading with Kolibri Global and China Southern

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

The idea behind Kolibri Global Energy and China Southern Airlines 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.