Correlation Between China Vanke and City Developments
Can any of the company-specific risk be diversified away by investing in both China Vanke and City Developments 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 Vanke and City Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Vanke Co and City Developments Limited, you can compare the effects of market volatilities on China Vanke and City Developments 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 Vanke with a short position of City Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Vanke and City Developments.
Diversification Opportunities for China Vanke and City Developments
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and City is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding China Vanke Co and City Developments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments and China Vanke 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 Vanke Co are associated (or correlated) with City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of China Vanke i.e., China Vanke and City Developments go up and down completely randomly.
Pair Corralation between China Vanke and City Developments
Assuming the 90 days horizon China Vanke Co is expected to generate 3.66 times more return on investment than City Developments. However, China Vanke is 3.66 times more volatile than City Developments Limited. It trades about 0.0 of its potential returns per unit of risk. City Developments Limited is currently generating about -0.11 per unit of risk. If you would invest 96.00 in China Vanke Co on September 4, 2024 and sell it today you would lose (60.00) from holding China Vanke Co or give up 62.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 32.26% |
| Values | Daily Returns |
China Vanke Co vs. City Developments Limited
Performance |
| Timeline |
| China Vanke |
| City Developments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Vanke and City Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Vanke and City Developments
The main advantage of trading using opposite China Vanke and City Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Vanke position performs unexpectedly, City Developments 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 City Developments will offset losses from the drop in City Developments' long position.The idea behind China Vanke Co and City Developments Limited 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.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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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