Correlation Between POSBO UNSPADRS20YC1 and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both POSBO UNSPADRS20YC1 and CHINA HUARONG 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 POSBO UNSPADRS20YC1 and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSBO UNSPADRS20YC1 and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on POSBO UNSPADRS20YC1 and CHINA HUARONG 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 POSBO UNSPADRS20YC1 with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSBO UNSPADRS20YC1 and CHINA HUARONG.
Diversification Opportunities for POSBO UNSPADRS20YC1 and CHINA HUARONG
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between POSBO and CHINA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding POSBO UNSPADRS20YC1 and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and POSBO UNSPADRS20YC1 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 POSBO UNSPADRS20YC1 are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of POSBO UNSPADRS20YC1 i.e., POSBO UNSPADRS20YC1 and CHINA HUARONG go up and down completely randomly.
Pair Corralation between POSBO UNSPADRS20YC1 and CHINA HUARONG
Assuming the 90 days trading horizon POSBO UNSPADRS20YC1 is expected to generate 0.09 times more return on investment than CHINA HUARONG. However, POSBO UNSPADRS20YC1 is 10.68 times less risky than CHINA HUARONG. It trades about 0.04 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about -0.03 per unit of risk. If you would invest 1,030 in POSBO UNSPADRS20YC1 on September 14, 2024 and sell it today you would earn a total of 10.00 from holding POSBO UNSPADRS20YC1 or generate 0.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSBO UNSPADRS20YC1 vs. CHINA HUARONG ENERHD 50
Performance |
| Timeline |
| POSBO UNSPADRS20YC1 |
| CHINA HUARONG ENERHD |
POSBO UNSPADRS20YC1 and CHINA HUARONG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSBO UNSPADRS20YC1 and CHINA HUARONG
The main advantage of trading using opposite POSBO UNSPADRS20YC1 and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSBO UNSPADRS20YC1 position performs unexpectedly, CHINA HUARONG 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 HUARONG will offset losses from the drop in CHINA HUARONG's long position.| POSBO UNSPADRS20YC1 vs. Postal Savings Bank | POSBO UNSPADRS20YC1 vs. UTD OV BK LOC ADR1 | POSBO UNSPADRS20YC1 vs. Superior Plus Corp | POSBO UNSPADRS20YC1 vs. SIVERS SEMICONDUCTORS AB |
| CHINA HUARONG vs. Scandinavian Tobacco Group | CHINA HUARONG vs. Zoom Video Communications | CHINA HUARONG vs. WillScot Mobile Mini | CHINA HUARONG vs. Zurich Insurance Group |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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