Correlation Between CHINA SOUTHN and Hoist Finance

Can any of the company-specific risk be diversified away by investing in both CHINA SOUTHN and Hoist Finance 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 Hoist Finance 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 Hoist Finance AB, you can compare the effects of market volatilities on CHINA SOUTHN and Hoist Finance 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 Hoist Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA SOUTHN and Hoist Finance.

Diversification Opportunities for CHINA SOUTHN and Hoist Finance

0.3

Correlation Coefficient

CHINA SOUTHN  Hoist Finance

Weak diversification

The 3 months correlation between CHINA and Hoist is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and Hoist Finance AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoist Finance AB 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 Hoist Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoist Finance AB has no effect on the direction of CHINA SOUTHN i.e., CHINA SOUTHN and Hoist Finance go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and Hoist Finance

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to generate 0.76 times more return on investment than Hoist Finance. However, CHINA SOUTHN AIR H is 1.32 times less risky than Hoist Finance. It trades about -0.03 of its potential returns per unit of risk. Hoist Finance AB is currently generating about -0.08 per unit of risk. If you would invest  50.00  in CHINA SOUTHN AIR H on December 20, 2024 and sell it today you would lose (4.00) from holding CHINA SOUTHN AIR H or give up 8.0% of portfolio value over 90 days.

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

CHINA SOUTHN AIR H   vs.  Hoist Finance AB

CHINA SOUTHN AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA SOUTHN AIR H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CHINA SOUTHN is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hoist Finance AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hoist Finance AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CHINA SOUTHN and Hoist Finance

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

The idea behind CHINA SOUTHN AIR H and Hoist Finance AB 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.