Correlation Between China Life and Snam SpA
Can any of the company-specific risk be diversified away by investing in both China Life and Snam SpA 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 Snam SpA 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 Snam SpA, you can compare the effects of market volatilities on China Life and Snam SpA 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 Snam SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Snam SpA.
Diversification Opportunities for China Life and Snam SpA
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Snam is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Snam SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snam SpA 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 Snam SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snam SpA has no effect on the direction of China Life i.e., China Life and Snam SpA go up and down completely randomly.
Pair Corralation between China Life and Snam SpA
Assuming the 90 days horizon China Life Insurance is expected to generate 2.0 times more return on investment than Snam SpA. However, China Life is 2.0 times more volatile than Snam SpA. It trades about 0.08 of its potential returns per unit of risk. Snam SpA is currently generating about 0.04 per unit of risk. If you would invest 137.00 in China Life Insurance on August 29, 2024 and sell it today you would earn a total of 58.00 from holding China Life Insurance or generate 42.34% 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. Snam SpA
Performance |
| Timeline |
| China Life Insurance |
| Snam SpA |
China Life and Snam SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Life and Snam SpA
The main advantage of trading using opposite China Life and Snam SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Life position performs unexpectedly, Snam SpA 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 Snam SpA will offset losses from the drop in Snam SpA'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 |
| Snam SpA vs. NewJersey Resources | Snam SpA vs. Atmos Energy | Snam SpA vs. UGI Corporation | Snam SpA vs. Chesapeake Utilities |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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