Correlation Between China Life and Henderson Land
Can any of the company-specific risk be diversified away by investing in both China Life and Henderson Land 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 Henderson Land 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 Henderson Land Development, you can compare the effects of market volatilities on China Life and Henderson Land 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 Henderson Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Henderson Land.
Diversification Opportunities for China Life and Henderson Land
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Henderson is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Henderson Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Land Devel 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 Henderson Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Land Devel has no effect on the direction of China Life i.e., China Life and Henderson Land go up and down completely randomly.
Pair Corralation between China Life and Henderson Land
Assuming the 90 days horizon China Life Insurance is expected to under-perform the Henderson Land. In addition to that, China Life is 1.96 times more volatile than Henderson Land Development. It trades about -0.06 of its total potential returns per unit of risk. Henderson Land Development is currently generating about 0.0 per unit of volatility. If you would invest 315.00 in Henderson Land Development on September 1, 2024 and sell it today you would lose (1.00) from holding Henderson Land Development or give up 0.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Life Insurance vs. Henderson Land Development
Performance |
| Timeline |
| China Life Insurance |
| Henderson Land Devel |
China Life and Henderson Land Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Life and Henderson Land
The main advantage of trading using opposite China Life and Henderson Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Life position performs unexpectedly, Henderson Land 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 Henderson Land will offset losses from the drop in Henderson Land'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 |
| Henderson Land vs. SM Prime Holdings | Henderson Land vs. Mitsubishi Estate Co | Henderson Land vs. Daito Trust Construction |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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