Correlation Between CHINA SOUTHN and CaixaBank

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

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

Diversification Opportunities for CHINA SOUTHN and CaixaBank

-0.17

Correlation Coefficient

CHINA SOUTHN  CaixaBank

Good diversification

The 3 months correlation between CHINA and CaixaBank is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and CaixaBank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CaixaBank SA and CHINA SOUTHN 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 SOUTHN AIR H are associated (or correlated) with CaixaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CaixaBank SA has no effect on the direction of CHINA SOUTHN i.e., CHINA SOUTHN and CaixaBank go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and CaixaBank

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to generate 1.53 times more return on investment than CaixaBank. However, CHINA SOUTHN is 1.53 times more volatile than CaixaBank SA. It trades about 0.14 of its potential returns per unit of risk. CaixaBank SA is currently generating about 0.05 per unit of risk. If you would invest  37.00  in CHINA SOUTHN AIR H on October 26, 2024 and sell it today you would earn a total of  9.00  from holding CHINA SOUTHN AIR H or generate 24.32% return on investment over 90 days.

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

CHINA SOUTHN AIR H   vs.  CaixaBank SA

CHINA SOUTHN AIR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA SOUTHN AIR H are ranked lower than 10 (%) 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.

CaixaBank SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CaixaBank SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, CaixaBank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA SOUTHN and CaixaBank

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

The idea behind CHINA SOUTHN AIR H and CaixaBank SA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.