Correlation Between China Life and Huadong Medicine
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By analyzing existing cross correlation between China Life Insurance and Huadong Medicine Co, you can compare the effects of market volatilities on China Life and Huadong Medicine 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 Life with a short position of Huadong Medicine. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Huadong Medicine.
Diversification Opportunities for China Life and Huadong Medicine
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Huadong is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Huadong Medicine Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huadong Medicine and China Life 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 Life Insurance are associated (or correlated) with Huadong Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huadong Medicine has no effect on the direction of China Life i.e., China Life and Huadong Medicine go up and down completely randomly.
Pair Corralation between China Life and Huadong Medicine
Assuming the 90 days trading horizon China Life Insurance is expected to under-perform the Huadong Medicine. In addition to that, China Life is 1.18 times more volatile than Huadong Medicine Co. It trades about -0.09 of its total potential returns per unit of risk. Huadong Medicine Co is currently generating about -0.02 per unit of volatility. If you would invest 3,381 in Huadong Medicine Co on October 14, 2024 and sell it today you would lose (118.00) from holding Huadong Medicine Co or give up 3.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Life Insurance vs. Huadong Medicine Co
Performance |
| Timeline |
| China Life Insurance |
| Huadong Medicine |
China Life and Huadong Medicine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Life and Huadong Medicine
The main advantage of trading using opposite China Life and Huadong Medicine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Life position performs unexpectedly, Huadong Medicine 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 Huadong Medicine will offset losses from the drop in Huadong Medicine's long position.| China Life vs. State Grid InformationCommunication | China Life vs. Bank of Communications | China Life vs. Anji Foodstuff Co | China Life vs. Wintao Communications Co |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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