Correlation Between China Southern and Cantalope

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Can any of the company-specific risk be diversified away by investing in both China Southern and Cantalope 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 Southern and Cantalope into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Southern Airlines and Cantalope, you can compare the effects of market volatilities on China Southern and Cantalope 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 Southern with a short position of Cantalope. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and Cantalope.

Diversification Opportunities for China Southern and Cantalope

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between China and Cantalope is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Cantalope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantalope and China Southern 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 Southern Airlines are associated (or correlated) with Cantalope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantalope has no effect on the direction of China Southern i.e., China Southern and Cantalope go up and down completely randomly.

Pair Corralation between China Southern and Cantalope

Considering the 90-day investment horizon China Southern Airlines is expected to generate 1.05 times more return on investment than Cantalope. However, China Southern is 1.05 times more volatile than Cantalope. It trades about 0.13 of its potential returns per unit of risk. Cantalope is currently generating about 0.07 per unit of risk. If you would invest  2,627  in China Southern Airlines on September 1, 2022 and sell it today you would earn a total of  295.00  from holding China Southern Airlines or generate 11.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

China Southern Airlines  vs.  Cantalope

 Performance (%) 
       Timeline  
China Southern Airlines 
China Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in China Southern Airlines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly sluggish basic indicators, China Southern may actually be approaching a critical reversion point that can send shares even higher in December 2022.

China Price Channel

Cantalope 
Cantalope Performance
0 of 100
Over the last 90 days Cantalope has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in December 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Cantalope Price Channel

China Southern and Cantalope Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Southern and Cantalope

The main advantage of trading using opposite China Southern and Cantalope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern position performs unexpectedly, Cantalope 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 Cantalope will offset losses from the drop in Cantalope's long position.
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The idea behind China Southern Airlines and Cantalope 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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