Correlation Between Varta AG and CHINA SOUTHN

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

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

Diversification Opportunities for Varta AG and CHINA SOUTHN

-0.48

Correlation Coefficient

Varta AG  CHINA SOUTHN

Very good diversification

The 3 months correlation between Varta and CHINA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG 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 Varta AG 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 Varta AG 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 Varta AG i.e., Varta AG and CHINA SOUTHN go up and down completely randomly.

Pair Corralation between Varta AG and CHINA SOUTHN

Assuming the 90 days trading horizon Varta AG is expected to under-perform the CHINA SOUTHN. In addition to that, Varta AG is 3.66 times more volatile than CHINA SOUTHN AIR H . It trades about 0.0 of its total potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about 0.1 per unit of volatility. If you would invest  34.00  in CHINA SOUTHN AIR H on September 29, 2024 and sell it today you would earn a total of  18.00  from holding CHINA SOUTHN AIR H or generate 52.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Varta AG  vs.  CHINA SOUTHN AIR H

Varta AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Varta AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Varta AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

CHINA SOUTHN AIR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA SOUTHN AIR H are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CHINA SOUTHN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varta AG and CHINA SOUTHN

The main advantage of trading using opposite Varta AG and CHINA SOUTHN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG 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 Varta AG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..