Correlation Between China Bills and Grand Fortune

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

Diversification Opportunities for China Bills and Grand Fortune

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between China and Grand is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding China Bills Finance and Grand Fortune Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Fortune Securities and China Bills 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 Bills Finance are associated (or correlated) with Grand Fortune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Fortune Securities has no effect on the direction of China Bills i.e., China Bills and Grand Fortune go up and down completely randomly.

Pair Corralation between China Bills and Grand Fortune

Assuming the 90 days trading horizon China Bills is expected to generate 4.25 times less return on investment than Grand Fortune. But when comparing it to its historical volatility, China Bills Finance is 2.27 times less risky than Grand Fortune. It trades about 0.02 of its potential returns per unit of risk. Grand Fortune Securities is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,159  in Grand Fortune Securities on September 14, 2024 and sell it today you would earn a total of  96.00  from holding Grand Fortune Securities or generate 8.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

China Bills Finance  vs.  Grand Fortune Securities

 Performance 
       Timeline  
China Bills Finance 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in China Bills Finance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Bills is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Grand Fortune Securities 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Grand Fortune Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grand Fortune is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Bills and Grand Fortune Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Bills and Grand Fortune

The main advantage of trading using opposite China Bills and Grand Fortune positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Bills position performs unexpectedly, Grand Fortune 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 Fortune will offset losses from the drop in Grand Fortune's long position.
The idea behind China Bills Finance and Grand Fortune Securities 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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