Correlation Between International CSRC and China General
Can any of the company-specific risk be diversified away by investing in both International CSRC and China General 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 International CSRC and China General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International CSRC Investment and China General Plastics, you can compare the effects of market volatilities on International CSRC and China General 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 International CSRC with a short position of China General. Check out your portfolio center. Please also check ongoing floating volatility patterns of International CSRC and China General.
Diversification Opportunities for International CSRC and China General
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and China is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding International CSRC Investment and China General Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China General Plastics and International CSRC 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 International CSRC Investment are associated (or correlated) with China General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China General Plastics has no effect on the direction of International CSRC i.e., International CSRC and China General go up and down completely randomly.
Pair Corralation between International CSRC and China General
Assuming the 90 days trading horizon International CSRC Investment is expected to under-perform the China General. But the stock apears to be less risky and, when comparing its historical volatility, International CSRC Investment is 1.82 times less risky than China General. The stock trades about -0.09 of its potential returns per unit of risk. The China General Plastics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,240 in China General Plastics on October 28, 2024 and sell it today you would earn a total of 15.00 from holding China General Plastics or generate 1.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
International CSRC Investment vs. China General Plastics
Performance |
Timeline |
International CSRC |
China General Plastics |
International CSRC and China General Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with International CSRC and China General
The main advantage of trading using opposite International CSRC and China General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International CSRC position performs unexpectedly, China General 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 General will offset losses from the drop in China General's long position.International CSRC vs. Nan Ya Plastics | International CSRC vs. Formosa Chemicals Fibre | International CSRC vs. China Steel Corp | International CSRC vs. Formosa Petrochemical Corp |
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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 the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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