Correlation Between China Airlines and Uni President

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

By analyzing existing cross correlation between China Airlines and Uni President Enterprises Corp, you can compare the effects of market volatilities on China Airlines and Uni President 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 Airlines with a short position of Uni President. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and Uni President.

Diversification Opportunities for China Airlines and Uni President

0.75

Correlation Coefficient

China Airlines  Uni President

Poor diversification

The 3 months correlation between China and Uni is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and Uni President Enterprises Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uni President Enterp and China Airlines 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 Airlines are associated (or correlated) with Uni President. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uni President Enterp has no effect on the direction of China Airlines i.e., China Airlines and Uni President go up and down completely randomly.

Pair Corralation between China Airlines and Uni President

Assuming the 90 days trading horizon China Airlines is expected to generate 1.52 times more return on investment than Uni President. However, China Airlines is 1.52 times more volatile than Uni President Enterprises Corp. It trades about 0.16 of its potential returns per unit of risk. Uni President Enterprises Corp is currently generating about 0.09 per unit of risk. If you would invest  1,915  in China Airlines on March 16, 2024 and sell it today you would earn a total of  385.00  from holding China Airlines or generate 20.1% return on investment over 90 days.

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

China Airlines  vs.  Uni President Enterprises Corp

China Airlines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Airlines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Uni President Enterp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Uni President Enterprises Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Uni President may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with China Airlines and Uni President

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

The idea behind China Airlines and Uni President Enterprises Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.