Correlation Between China Railway and China Railway
Can any of the company-specific risk be diversified away by investing in both China Railway and China Railway 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 Railway and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Railway Construction and China Railway Group, you can compare the effects of market volatilities on China Railway and China Railway 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 Railway with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and China Railway.
Diversification Opportunities for China Railway and China Railway
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and China is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group and China Railway 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 Railway Construction are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of China Railway i.e., China Railway and China Railway go up and down completely randomly.
Pair Corralation between China Railway and China Railway
Assuming the 90 days horizon China Railway is expected to generate 1.47 times less return on investment than China Railway. But when comparing it to its historical volatility, China Railway Construction is 1.14 times less risky than China Railway. It trades about 0.04 of its potential returns per unit of risk. China Railway Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 20.00 in China Railway Group on August 31, 2024 and sell it today you would earn a total of 24.00 from holding China Railway Group or generate 120.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.74% |
| Values | Daily Returns |
China Railway Construction vs. China Railway Group
Performance |
| Timeline |
| China Railway Constr |
| China Railway Group |
China Railway and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Railway and China Railway
The main advantage of trading using opposite China Railway and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway position performs unexpectedly, China Railway 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 Railway will offset losses from the drop in China Railway's long position.| China Railway vs. CPU SOFTWAREHOUSE | China Railway vs. Magic Software Enterprises | China Railway vs. Japan Medical Dynamic | China Railway vs. Compugroup Medical SE |
| China Railway vs. TEXAS ROADHOUSE | China Railway vs. Ming Le Sports | China Railway vs. Columbia Sportswear | China Railway vs. TRAVEL LEISURE DL 01 |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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