Correlation Between REGAL ASIAN and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both REGAL ASIAN 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 REGAL ASIAN and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REGAL ASIAN INVESTMENTS and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on REGAL ASIAN 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 REGAL ASIAN with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of REGAL ASIAN and CHINA HUARONG.
Diversification Opportunities for REGAL ASIAN and CHINA HUARONG
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between REGAL and CHINA is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding REGAL ASIAN INVESTMENTS 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 REGAL ASIAN 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 REGAL ASIAN INVESTMENTS 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 REGAL ASIAN i.e., REGAL ASIAN and CHINA HUARONG go up and down completely randomly.
Pair Corralation between REGAL ASIAN and CHINA HUARONG
Assuming the 90 days trading horizon REGAL ASIAN INVESTMENTS is expected to generate 0.29 times more return on investment than CHINA HUARONG. However, REGAL ASIAN INVESTMENTS is 3.47 times less risky than CHINA HUARONG. It trades about -0.1 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about -0.21 per unit of risk. If you would invest 136.00 in REGAL ASIAN INVESTMENTS on August 24, 2024 and sell it today you would lose (5.00) from holding REGAL ASIAN INVESTMENTS or give up 3.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
REGAL ASIAN INVESTMENTS vs. CHINA HUARONG ENERHD 50
Performance |
| Timeline |
| REGAL ASIAN INVESTMENTS |
| CHINA HUARONG ENERHD |
REGAL ASIAN and CHINA HUARONG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REGAL ASIAN and CHINA HUARONG
The main advantage of trading using opposite REGAL ASIAN and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REGAL ASIAN 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.| REGAL ASIAN vs. Apple Inc | REGAL ASIAN vs. Apple Inc | REGAL ASIAN vs. Apple Inc | REGAL ASIAN vs. Apple Inc |
| CHINA HUARONG vs. Perdoceo Education | CHINA HUARONG vs. MCEWEN MINING INC | CHINA HUARONG vs. DeVry Education Group | CHINA HUARONG vs. Zijin Mining 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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