Correlation Between COMPUTERSHARE and CHINA SOUTHN

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

By analyzing existing cross correlation between COMPUTERSHARE and CHINA SOUTHN AIR H , you can compare the effects of market volatilities on COMPUTERSHARE and CHINA SOUTHN 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 COMPUTERSHARE with a short position of CHINA SOUTHN. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMPUTERSHARE and CHINA SOUTHN.

Diversification Opportunities for COMPUTERSHARE and CHINA SOUTHN

0.85

Correlation Coefficient

COMPUTERSHARE  CHINA SOUTHN

Very poor diversification

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

Pair Corralation between COMPUTERSHARE and CHINA SOUTHN

Assuming the 90 days trading horizon COMPUTERSHARE is expected to generate 0.61 times more return on investment than CHINA SOUTHN. However, COMPUTERSHARE is 1.65 times less risky than CHINA SOUTHN. It trades about 0.27 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about 0.17 per unit of risk. If you would invest  1,620  in COMPUTERSHARE on October 9, 2024 and sell it today you would earn a total of  480.00  from holding COMPUTERSHARE or generate 29.63% return on investment over 90 days.

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

COMPUTERSHARE  vs.  CHINA SOUTHN AIR H

COMPUTERSHARE

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, COMPUTERSHARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

CHINA SOUTHN AIR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA SOUTHN AIR H are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CHINA SOUTHN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMPUTERSHARE and CHINA SOUTHN

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

The idea behind COMPUTERSHARE and CHINA SOUTHN AIR H 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.