Correlation Between Prince Housing and Great China
Can any of the company-specific risk be diversified away by investing in both Prince Housing and Great China 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 Prince Housing and Great China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prince Housing Development and Great China Metal, you can compare the effects of market volatilities on Prince Housing and Great China 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 Prince Housing with a short position of Great China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prince Housing and Great China.
Diversification Opportunities for Prince Housing and Great China
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Prince and Great is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Prince Housing Development and Great China Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great China Metal and Prince Housing 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 Prince Housing Development are associated (or correlated) with Great China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great China Metal has no effect on the direction of Prince Housing i.e., Prince Housing and Great China go up and down completely randomly.
Pair Corralation between Prince Housing and Great China
Assuming the 90 days trading horizon Prince Housing Development is expected to under-perform the Great China. In addition to that, Prince Housing is 3.18 times more volatile than Great China Metal. It trades about -0.17 of its total potential returns per unit of risk. Great China Metal is currently generating about 0.04 per unit of volatility. If you would invest 2,295 in Great China Metal on November 3, 2024 and sell it today you would earn a total of 10.00 from holding Great China Metal or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prince Housing Development vs. Great China Metal
Performance |
| Timeline |
| Prince Housing Devel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Great China Metal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Prince Housing and Great China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prince Housing and Great China
The main advantage of trading using opposite Prince Housing and Great China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prince Housing position performs unexpectedly, Great China 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 Great China will offset losses from the drop in Great China's long position.The idea behind Prince Housing Development and Great China Metal 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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