Correlation Between China Life and Sanlam
Can any of the company-specific risk be diversified away by investing in both China Life and Sanlam 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 Sanlam 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 Sanlam Ltd PK, you can compare the effects of market volatilities on China Life and Sanlam 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 Sanlam. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Sanlam.
Diversification Opportunities for China Life and Sanlam
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Sanlam is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Sanlam Ltd PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanlam Ltd PK 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 Sanlam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanlam Ltd PK has no effect on the direction of China Life i.e., China Life and Sanlam go up and down completely randomly.
Pair Corralation between China Life and Sanlam
Assuming the 90 days horizon China Life Insurance is expected to generate 1.98 times more return on investment than Sanlam. However, China Life is 1.98 times more volatile than Sanlam Ltd PK. It trades about 0.07 of its potential returns per unit of risk. Sanlam Ltd PK is currently generating about 0.08 per unit of risk. If you would invest 126.00 in China Life Insurance on August 24, 2024 and sell it today you would earn a total of 74.00 from holding China Life Insurance or generate 58.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
China Life Insurance vs. Sanlam Ltd PK
Performance |
| Timeline |
| China Life Insurance |
| Sanlam Ltd PK |
China Life and Sanlam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Life and Sanlam
The main advantage of trading using opposite China Life and Sanlam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Life position performs unexpectedly, Sanlam 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 Sanlam will offset losses from the drop in Sanlam's long position.| China Life vs. CNO Financial Group | China Life vs. Ping An Insurance | China Life vs. Lincoln National | China Life vs. AIA Group Ltd |
| Sanlam vs. Ping An Insurance | Sanlam vs. CNO Financial Group | Sanlam vs. Genworth Financial | Sanlam vs. MetLife Preferred Stock |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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