Correlation Between China and Grand Ocean
Can any of the company-specific risk be diversified away by investing in both China and Grand Ocean 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 and Grand Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Motor Corp and Grand Ocean Retail, you can compare the effects of market volatilities on China and Grand Ocean 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 with a short position of Grand Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of China and Grand Ocean.
Diversification Opportunities for China and Grand Ocean
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Grand is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding China Motor Corp and Grand Ocean Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Ocean Retail and China 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 Motor Corp are associated (or correlated) with Grand Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Ocean Retail has no effect on the direction of China i.e., China and Grand Ocean go up and down completely randomly.
Pair Corralation between China and Grand Ocean
Assuming the 90 days trading horizon China Motor Corp is expected to generate 0.75 times more return on investment than Grand Ocean. However, China Motor Corp is 1.33 times less risky than Grand Ocean. It trades about -0.06 of its potential returns per unit of risk. Grand Ocean Retail is currently generating about -0.09 per unit of risk. If you would invest 8,230 in China Motor Corp on November 4, 2024 and sell it today you would lose (130.00) from holding China Motor Corp or give up 1.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Motor Corp vs. Grand Ocean Retail
Performance |
| Timeline |
| China Motor Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Grand Ocean Retail |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China and Grand Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China and Grand Ocean
The main advantage of trading using opposite China and Grand Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China position performs unexpectedly, Grand Ocean 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 Grand Ocean will offset losses from the drop in Grand Ocean's long position.The idea behind China Motor Corp and Grand Ocean Retail 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |