Correlation Between China Life and Fortum Oyj
Can any of the company-specific risk be diversified away by investing in both China Life and Fortum Oyj 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 Fortum Oyj 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 Fortum Oyj ADR, you can compare the effects of market volatilities on China Life and Fortum Oyj 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 Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Fortum Oyj.
Diversification Opportunities for China Life and Fortum Oyj
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Fortum is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Fortum Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj ADR 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 Fortum Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortum Oyj ADR has no effect on the direction of China Life i.e., China Life and Fortum Oyj go up and down completely randomly.
Pair Corralation between China Life and Fortum Oyj
Assuming the 90 days horizon China Life Insurance is expected to under-perform the Fortum Oyj. In addition to that, China Life is 1.35 times more volatile than Fortum Oyj ADR. It trades about -0.06 of its total potential returns per unit of risk. Fortum Oyj ADR is currently generating about 0.12 per unit of volatility. If you would invest 277.00 in Fortum Oyj ADR on September 1, 2024 and sell it today you would earn a total of 16.00 from holding Fortum Oyj ADR or generate 5.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Life Insurance vs. Fortum Oyj ADR
Performance |
| Timeline |
| China Life Insurance |
| Fortum Oyj ADR |
China Life and Fortum Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Life and Fortum Oyj
The main advantage of trading using opposite China Life and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Life position performs unexpectedly, Fortum Oyj 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 Fortum Oyj will offset losses from the drop in Fortum Oyj's long position.| China Life vs. AIA Group | China Life vs. Jackson Financial | China Life vs. Sanlam Ltd PK | China Life vs. CNO Financial Group |
| Fortum Oyj vs. Constellation Energy Corp | Fortum Oyj vs. Astra Energy | Fortum Oyj vs. Powertap Hydrogen Capital | Fortum Oyj vs. Brenmiller Energy Ltd |
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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