Correlation Between China Railway and Metro Investment
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By analyzing existing cross correlation between China Railway Construction and Metro Investment Development, you can compare the effects of market volatilities on China Railway and Metro Investment 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 Railway with a short position of Metro Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Metro Investment.
Diversification Opportunities for China Railway and Metro Investment
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Metro is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and Metro Investment Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Investment Dev and China Railway 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 Railway Construction are associated (or correlated) with Metro Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Investment Dev has no effect on the direction of China Railway i.e., China Railway and Metro Investment go up and down completely randomly.
Pair Corralation between China Railway and Metro Investment
Assuming the 90 days trading horizon China Railway Construction is expected to under-perform the Metro Investment. But the stock apears to be less risky and, when comparing its historical volatility, China Railway Construction is 2.19 times less risky than Metro Investment. The stock trades about -0.28 of its potential returns per unit of risk. The Metro Investment Development is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 401.00 in Metro Investment Development on October 22, 2024 and sell it today you would lose (15.00) from holding Metro Investment Development or give up 3.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Railway Construction vs. Metro Investment Development
Performance |
| Timeline |
| China Railway Constr |
| Metro Investment Dev |
China Railway and Metro Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Railway and Metro Investment
The main advantage of trading using opposite China Railway and Metro Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway position performs unexpectedly, Metro Investment 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 Metro Investment will offset losses from the drop in Metro Investment's long position.| China Railway vs. Guangdong Silvere Sci | China Railway vs. Shenyang Blue Silver | China Railway vs. Jinsanjiang Silicon Material | China Railway vs. Jinhui Mining Co |
| Metro Investment vs. Nuode Investment Co | Metro Investment vs. Zhejiang Construction Investment | Metro Investment vs. Jointo Energy Investment | Metro Investment vs. Jiangsu Yueda 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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