Correlation Between China Eastern and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both China Eastern and Southwest Airlines 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 Eastern and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Eastern Airlines and Southwest Airlines, you can compare the effects of market volatilities on China Eastern and Southwest Airlines 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 Eastern with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Eastern and Southwest Airlines.
Diversification Opportunities for China Eastern and Southwest Airlines
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Southwest is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and China Eastern 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 Eastern Airlines are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of China Eastern i.e., China Eastern and Southwest Airlines go up and down completely randomly.
Pair Corralation between China Eastern and Southwest Airlines
If you would invest 1,998 in China Eastern Airlines on January 26, 2024 and sell it today you would earn a total of 0.00 from holding China Eastern Airlines or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 1.61% |
| Values | Daily Returns |
China Eastern Airlines vs. Southwest Airlines
Performance |
| Timeline |
| China Eastern Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Southwest Airlines |
China Eastern and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Eastern and Southwest Airlines
The main advantage of trading using opposite China Eastern and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Eastern position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| China Eastern vs. Reservoir Media | China Eastern vs. Wicket Gaming AB | China Eastern vs. Alvotech | China Eastern vs. BCE Inc |
| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Spirit Airlines |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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