Correlation Between China Eastern and Gol Linhas

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

Diversification Opportunities for China Eastern and Gol Linhas

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between China and Gol is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines and Gol Linhas Aereas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Aereas 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 Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Aereas has no effect on the direction of China Eastern i.e., China Eastern and Gol Linhas go up and down completely randomly.

Pair Corralation between China Eastern and Gol Linhas

If you would invest  108.00  in Gol Linhas Aereas on December 29, 2023 and sell it today you would earn a total of  0.00  from holding Gol Linhas Aereas or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

China Eastern Airlines  vs.  Gol Linhas Aereas

 Performance 
       Timeline  
China Eastern Airlines 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days China Eastern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, China Eastern is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Gol Linhas Aereas 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Gol Linhas Aereas 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 quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

China Eastern and Gol Linhas Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Eastern and Gol Linhas

The main advantage of trading using opposite China Eastern and Gol Linhas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Eastern position performs unexpectedly, Gol Linhas 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 Gol Linhas will offset losses from the drop in Gol Linhas' long position.
The idea behind China Eastern Airlines and Gol Linhas Aereas 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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