Correlation Between China International and Huafa Industrial
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By analyzing existing cross correlation between China International Capital and Huafa Industrial Co, you can compare the effects of market volatilities on China International and Huafa Industrial 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 International with a short position of Huafa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China International and Huafa Industrial.
Diversification Opportunities for China International and Huafa Industrial
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between China and Huafa is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding China International Capital and Huafa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huafa Industrial and China International 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 International Capital are associated (or correlated) with Huafa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huafa Industrial has no effect on the direction of China International i.e., China International and Huafa Industrial go up and down completely randomly.
Pair Corralation between China International and Huafa Industrial
Assuming the 90 days trading horizon China International Capital is expected to generate 1.42 times more return on investment than Huafa Industrial. However, China International is 1.42 times more volatile than Huafa Industrial Co. It trades about -0.08 of its potential returns per unit of risk. Huafa Industrial Co is currently generating about -0.16 per unit of risk. If you would invest 3,659 in China International Capital on August 28, 2024 and sell it today you would lose (195.00) from holding China International Capital or give up 5.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China International Capital vs. Huafa Industrial Co
Performance |
| Timeline |
| China International |
| Huafa Industrial |
China International and Huafa Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China International and Huafa Industrial
The main advantage of trading using opposite China International and Huafa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China International position performs unexpectedly, Huafa Industrial 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 Huafa Industrial will offset losses from the drop in Huafa Industrial's long position.The idea behind China International Capital and Huafa Industrial Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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