Correlation Between China Carbon and Legrand SA
Can any of the company-specific risk be diversified away by investing in both China Carbon and Legrand SA 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 Carbon and Legrand SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Carbon Graphit and Legrand SA ADR, you can compare the effects of market volatilities on China Carbon and Legrand SA 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 Carbon with a short position of Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Carbon and Legrand SA.
Diversification Opportunities for China Carbon and Legrand SA
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Legrand is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Carbon Graphit and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR and China Carbon 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 Carbon Graphit are associated (or correlated) with Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA ADR has no effect on the direction of China Carbon i.e., China Carbon and Legrand SA go up and down completely randomly.
Pair Corralation between China Carbon and Legrand SA
Given the investment horizon of 90 days China Carbon Graphit is expected to generate 7.5 times more return on investment than Legrand SA. However, China Carbon is 7.5 times more volatile than Legrand SA ADR. It trades about 0.03 of its potential returns per unit of risk. Legrand SA ADR is currently generating about 0.05 per unit of risk. If you would invest 0.02 in China Carbon Graphit on September 12, 2024 and sell it today you would lose (0.01) from holding China Carbon Graphit or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
China Carbon Graphit vs. Legrand SA ADR
Performance |
| Timeline |
| China Carbon Graphit |
| Legrand SA ADR |
China Carbon and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Carbon and Legrand SA
The main advantage of trading using opposite China Carbon and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Carbon position performs unexpectedly, Legrand SA 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 Legrand SA will offset losses from the drop in Legrand SA's long position.| China Carbon vs. FREYR Battery SA | China Carbon vs. nVent Electric PLC | China Carbon vs. Hubbell | China Carbon vs. Advanced Energy Industries |
| Legrand SA vs. AFC Energy plc | Legrand SA vs. Loop Energy | Legrand SA vs. Sunrise New Energy | Legrand SA vs. Signify NV |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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