Correlation Between China Southern and TRAINLINE PLC

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

Diversification Opportunities for China Southern and TRAINLINE PLC

0.08

Correlation Coefficient

China Southern  TRAINLINE PLC

Significant diversification

The 3 months correlation between China and TRAINLINE is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS 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 TRAINLINE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAINLINE PLC LS has no effect on the direction of China Southern i.e., China Southern and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between China Southern and TRAINLINE PLC

Assuming the 90 days trading horizon China Southern Airlines is expected to generate 0.93 times more return on investment than TRAINLINE PLC. However, China Southern Airlines is 1.08 times less risky than TRAINLINE PLC. It trades about 0.04 of its potential returns per unit of risk. TRAINLINE PLC LS is currently generating about 0.01 per unit of risk. If you would invest  41.00  in China Southern Airlines on April 1, 2025 and sell it today you would earn a total of  2.00  from holding China Southern Airlines or generate 4.88% return on investment over 90 days.

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

China Southern Airlines  vs.  TRAINLINE PLC LS

China Southern Airlines

Risk-Adjusted Performance

Insignificant

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 fragile technical indicators, China Southern may actually be approaching a critical reversion point that can send shares even higher in July 2025.

TRAINLINE PLC LS

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAINLINE PLC LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TRAINLINE PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Southern and TRAINLINE PLC

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

The idea behind China Southern Airlines and TRAINLINE PLC LS 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.