Correlation Between Air China and Changjiang Publishing

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

By analyzing existing cross correlation between Air China Ltd and Changjiang Publishing Media, you can compare the effects of market volatilities on Air China and Changjiang Publishing 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 Air China with a short position of Changjiang Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Changjiang Publishing.

Diversification Opportunities for Air China and Changjiang Publishing

0.32

Correlation Coefficient

Air China  Changjiang Publishing

Weak diversification

The 3 months correlation between Air and Changjiang is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and Changjiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changjiang Publishing and Air China 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 Air China Ltd are associated (or correlated) with Changjiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changjiang Publishing has no effect on the direction of Air China i.e., Air China and Changjiang Publishing go up and down completely randomly.

Pair Corralation between Air China and Changjiang Publishing

Assuming the 90 days trading horizon Air China Ltd is expected to generate 0.96 times more return on investment than Changjiang Publishing. However, Air China Ltd is 1.04 times less risky than Changjiang Publishing. It trades about 0.23 of its potential returns per unit of risk. Changjiang Publishing Media is currently generating about 0.05 per unit of risk. If you would invest  632.00  in Air China Ltd on September 16, 2024 and sell it today you would earn a total of  229.00  from holding Air China Ltd or generate 36.23% return on investment over 90 days.

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

Air China Ltd  vs.  Changjiang Publishing Media

Air China

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Ltd are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air China sustained solid returns over the last few months and may actually be approaching a breakup point.

Changjiang Publishing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Publishing Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changjiang Publishing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Air China and Changjiang Publishing

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

The idea behind Air China Ltd and Changjiang Publishing Media 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.

Check out your portfolio center.

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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .