Correlation Between CHINA SOUTHN and FAIR ISAAC

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

Diversification Opportunities for CHINA SOUTHN and FAIR ISAAC

0.17

Correlation Coefficient

CHINA SOUTHN  FAIR ISAAC

Average diversification

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

Pair Corralation between CHINA SOUTHN and FAIR ISAAC

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to generate 1.23 times more return on investment than FAIR ISAAC. However, CHINA SOUTHN is 1.23 times more volatile than FAIR ISAAC. It trades about 0.14 of its potential returns per unit of risk. FAIR ISAAC is currently generating about -0.02 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CHINA SOUTHN AIR H   vs.  FAIR ISAAC

CHINA SOUTHN AIR

Risk-Adjusted Performance

10 of 100

Good

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.

FAIR ISAAC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FAIR ISAAC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, FAIR ISAAC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CHINA SOUTHN and FAIR ISAAC

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

The idea behind CHINA SOUTHN AIR H and FAIR ISAAC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.