Correlation Between CHINA SOUTHN and KBC GR

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

Diversification Opportunities for CHINA SOUTHN and KBC GR

-0.6

Correlation Coefficient

CHINA SOUTHN  KBC GR

Excellent diversification

The 3 months correlation between CHINA and KBC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and KBC GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBC GR 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 KBC GR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBC GR has no effect on the direction of CHINA SOUTHN i.e., CHINA SOUTHN and KBC GR go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and KBC GR

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to under-perform the KBC GR. In addition to that, CHINA SOUTHN is 2.03 times more volatile than KBC GR. It trades about -0.03 of its total potential returns per unit of risk. KBC GR is currently generating about 0.2 per unit of volatility. If you would invest  7,326  in KBC GR on December 20, 2024 and sell it today you would earn a total of  1,316  from holding KBC GR or generate 17.96% return on investment over 90 days.

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

CHINA SOUTHN AIR H   vs.  KBC GR

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

KBC GR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KBC GR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, KBC GR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA SOUTHN and KBC GR

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

The idea behind CHINA SOUTHN AIR H and KBC GR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.