Correlation Between China Securities and DO Home

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Can any of the company-specific risk be diversified away by investing in both China Securities and DO Home 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 Securities and DO Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Securities 800 and DO Home Collection, you can compare the effects of market volatilities on China Securities and DO Home 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 Securities with a short position of DO Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Securities and DO Home.

Diversification Opportunities for China Securities and DO Home

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between China and 002798 is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding China Securities 800 and DO Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DO Home Collection and China Securities 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 Securities 800 are associated (or correlated) with DO Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DO Home Collection has no effect on the direction of China Securities i.e., China Securities and DO Home go up and down completely randomly.
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Pair Corralation between China Securities and DO Home

Assuming the 90 days trading horizon China Securities is expected to generate 2.66 times less return on investment than DO Home. But when comparing it to its historical volatility, China Securities 800 is 1.79 times less risky than DO Home. It trades about 0.05 of its potential returns per unit of risk. DO Home Collection is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  353.00  in DO Home Collection on September 3, 2024 and sell it today you would earn a total of  91.00  from holding DO Home Collection or generate 25.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

China Securities 800  vs.  DO Home Collection

 Performance 
       Timeline  

China Securities and DO Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Securities and DO Home

The main advantage of trading using opposite China Securities and DO Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Securities position performs unexpectedly, DO Home 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 DO Home will offset losses from the drop in DO Home's long position.
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The idea behind China Securities 800 and DO Home Collection 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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