Correlation Between China Development and New Advanced
Can any of the company-specific risk be diversified away by investing in both China Development and New Advanced 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 Development and New Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Development Financial and New Advanced Electronics, you can compare the effects of market volatilities on China Development and New Advanced 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 Development with a short position of New Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and New Advanced.
Diversification Opportunities for China Development and New Advanced
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and New is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and New Advanced Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Advanced Electronics and China Development 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 Development Financial are associated (or correlated) with New Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Advanced Electronics has no effect on the direction of China Development i.e., China Development and New Advanced go up and down completely randomly.
Pair Corralation between China Development and New Advanced
Assuming the 90 days trading horizon China Development Financial is expected to generate 0.53 times more return on investment than New Advanced. However, China Development Financial is 1.88 times less risky than New Advanced. It trades about 0.12 of its potential returns per unit of risk. New Advanced Electronics is currently generating about -0.31 per unit of risk. If you would invest 1,675 in China Development Financial on September 1, 2024 and sell it today you would earn a total of 45.00 from holding China Development Financial or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Development Financial vs. New Advanced Electronics
Performance |
| Timeline |
| China Development |
| New Advanced Electronics |
China Development and New Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and New Advanced
The main advantage of trading using opposite China Development and New Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, New Advanced 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 New Advanced will offset losses from the drop in New Advanced's long position.| China Development vs. Central Reinsurance Corp | China Development vs. Huaku Development Co | China Development vs. Fubon Financial Holding |
| New Advanced vs. STL Technology Co | New Advanced vs. Univacco Technology | New Advanced vs. CHC Healthcare Group | New Advanced vs. Genovate Biotechnology Co |
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 CEOs Directory module to screen CEOs from public companies around the world.
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