Correlation Between CICC Fund and Huaxia Fund

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

Diversification Opportunities for CICC Fund and Huaxia Fund

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between CICC and Huaxia is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CICC Fund Management and Huaxia Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Fund Management and CICC Fund 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 CICC Fund Management are associated (or correlated) with Huaxia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Fund Management has no effect on the direction of CICC Fund i.e., CICC Fund and Huaxia Fund go up and down completely randomly.

Pair Corralation between CICC Fund and Huaxia Fund

Assuming the 90 days trading horizon CICC Fund Management is expected to generate 0.7 times more return on investment than Huaxia Fund. However, CICC Fund Management is 1.43 times less risky than Huaxia Fund. It trades about 0.19 of its potential returns per unit of risk. Huaxia Fund Management is currently generating about 0.07 per unit of risk. If you would invest  314.00  in CICC Fund Management on August 25, 2024 and sell it today you would earn a total of  10.00  from holding CICC Fund Management or generate 3.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

CICC Fund Management  vs.  Huaxia Fund Management

 Performance 
       Timeline  
CICC Fund Management 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CICC Fund Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CICC Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Huaxia Fund Management 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Huaxia Fund Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CICC Fund and Huaxia Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CICC Fund and Huaxia Fund

The main advantage of trading using opposite CICC Fund and Huaxia Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CICC Fund position performs unexpectedly, Huaxia Fund 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 Huaxia Fund will offset losses from the drop in Huaxia Fund's long position.
The idea behind CICC Fund Management and Huaxia Fund Management 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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