Correlation Between China Life and Ziel Home

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Can any of the company-specific risk be diversified away by investing in both China Life and Ziel Home 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 Life and Ziel Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Life Insurance and Ziel Home Furnishing, you can compare the effects of market volatilities on China Life and Ziel Home 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 Ziel Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Ziel Home.

Diversification Opportunities for China Life and Ziel Home

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between China and Ziel is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Ziel Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ziel Home Furnishing 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 Ziel Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ziel Home Furnishing has no effect on the direction of China Life i.e., China Life and Ziel Home go up and down completely randomly.

Pair Corralation between China Life and Ziel Home

Assuming the 90 days trading horizon China Life Insurance is expected to generate 0.64 times more return on investment than Ziel Home. However, China Life Insurance is 1.57 times less risky than Ziel Home. It trades about 0.03 of its potential returns per unit of risk. Ziel Home Furnishing is currently generating about 0.0 per unit of risk. If you would invest  3,311  in China Life Insurance on November 27, 2024 and sell it today you would earn a total of  688.00  from holding China Life Insurance or generate 20.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy88.99%
ValuesDaily Returns

China Life Insurance  vs.  Ziel Home Furnishing

 Performance 
       Timeline  
China Life Insurance 

Risk-Adjusted Performance

Very Weak

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

Risk-Adjusted Performance

Very Weak

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

China Life and Ziel Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Life and Ziel Home

The main advantage of trading using opposite China Life and Ziel Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Life position performs unexpectedly, Ziel Home 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 Ziel Home will offset losses from the drop in Ziel Home's long position.
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The idea behind China Life Insurance and Ziel Home Furnishing 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.
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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