Correlation Between El Al and China Southern

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

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

Diversification Opportunities for El Al and China Southern

-0.23

Correlation Coefficient

El Al  China Southern

Very good diversification

The 3 months correlation between ELALF and China is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding El Al Israel and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines and El Al 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 El Al Israel are associated (or correlated) with China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of El Al i.e., El Al and China Southern go up and down completely randomly.

Pair Corralation between El Al and China Southern

Assuming the 90 days horizon El Al Israel is expected to generate 0.62 times more return on investment than China Southern. However, El Al Israel is 1.62 times less risky than China Southern. It trades about 0.07 of its potential returns per unit of risk. China Southern Airlines is currently generating about 0.0 per unit of risk. If you would invest  100.00  in El Al Israel on January 8, 2025 and sell it today you would earn a total of  171.00  from holding El Al Israel or generate 171.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.75%
Values	Daily Returns

El Al Israel  vs.  China Southern Airlines

El Al Israel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in El Al Israel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, El Al reported solid returns over the last few months and may actually be approaching a breakup point.

China Southern Airlines

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Southern Airlines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, China Southern is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with El Al and China Southern

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

The idea behind El Al Israel and China Southern Airlines 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.