Correlation Between New China and 516220
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By analyzing existing cross correlation between New China Life and 516220, you can compare the effects of market volatilities on New China and 516220 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 New China with a short position of 516220. Check out your portfolio center. Please also check ongoing floating volatility patterns of New China and 516220.
Diversification Opportunities for New China and 516220
Poor diversification
The 3 months correlation between New and 516220 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding New China Life and 516220 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 516220 and New China 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 New China Life are associated (or correlated) with 516220. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 516220 has no effect on the direction of New China i.e., New China and 516220 go up and down completely randomly.
Pair Corralation between New China and 516220
Assuming the 90 days trading horizon New China Life is expected to generate 1.75 times more return on investment than 516220. However, New China is 1.75 times more volatile than 516220. It trades about 0.13 of its potential returns per unit of risk. 516220 is currently generating about 0.08 per unit of risk. If you would invest 4,568 in New China Life on November 7, 2024 and sell it today you would earn a total of 195.00 from holding New China Life or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New China Life vs. 516220
Performance |
| Timeline |
| New China Life |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| 516220 |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
New China and 516220 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New China and 516220
The main advantage of trading using opposite New China and 516220 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New China position performs unexpectedly, 516220 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 516220 will offset losses from the drop in 516220's long position.The idea behind New China Life and 516220 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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