Correlation Between 14040HCX1 and China Southern

Can any of the company-specific risk be diversified away by investing in both 14040HCX1 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 14040HCX1 and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COF 5468 01 FEB 29 and China Southern Airlines, you can compare the effects of market volatilities on 14040HCX1 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 14040HCX1 with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of 14040HCX1 and China Southern.

Diversification Opportunities for 14040HCX1 and China Southern

-0.59

Correlation Coefficient

14040HCX1  China Southern

Excellent diversification

The 3 months correlation between 14040HCX1 and China is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding COF 5468 01 FEB 29 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 14040HCX1 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 COF 5468 01 FEB 29 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 14040HCX1 i.e., 14040HCX1 and China Southern go up and down completely randomly.

Pair Corralation between 14040HCX1 and China Southern

Assuming the 90 days trading horizon COF 5468 01 FEB 29 is expected to under-perform the China Southern. But the bond apears to be less risky and, when comparing its historical volatility, COF 5468 01 FEB 29 is 8.11 times less risky than China Southern. The bond trades about -0.18 of its potential returns per unit of risk. The China Southern Airlines is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  40.00  in China Southern Airlines on October 10, 2024 and sell it today you would earn a total of  14.00  from holding China Southern Airlines or generate 35.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

COF 5468 01 FEB 29  vs.  China Southern Airlines

COF 5468 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COF 5468 01 FEB 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 14040HCX1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Southern Airlines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Southern Airlines are ranked lower than 10 (%) 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 14040HCX1 and China Southern

The main advantage of trading using opposite 14040HCX1 and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 14040HCX1 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 COF 5468 01 FEB 29 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.