Correlation Between China New and Waters
Can any of the company-specific risk be diversified away by investing in both China New and Waters 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 New and Waters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China New Energy and Waters, you can compare the effects of market volatilities on China New and Waters 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 New with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of China New and Waters.
Diversification Opportunities for China New and Waters
Excellent diversification
The 3 months correlation between China and Waters is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding China New Energy and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and China New 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 New Energy are associated (or correlated) with Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of China New i.e., China New and Waters go up and down completely randomly.
Pair Corralation between China New and Waters
Given the investment horizon of 90 days China New Energy is expected to generate 8.63 times more return on investment than Waters. However, China New is 8.63 times more volatile than Waters. It trades about 0.19 of its potential returns per unit of risk. Waters is currently generating about 0.2 per unit of risk. If you would invest 0.40 in China New Energy on September 1, 2024 and sell it today you would earn a total of 0.40 from holding China New Energy or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China New Energy vs. Waters
Performance |
| Timeline |
| China New Energy |
| Waters |
China New and Waters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China New and Waters
The main advantage of trading using opposite China New and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China New position performs unexpectedly, Waters 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 Waters will offset losses from the drop in Waters' long position.| China New vs. Sonic Healthcare Ltd | China New vs. Lonza Group | China New vs. Charles River Laboratories | China New vs. Qiagen NV |
| Waters vs. Verve Therapeutics | Waters vs. Beam Therapeutics | Waters vs. Caribou Biosciences | Waters vs. Sana Biotechnology |
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 CEOs Directory module to screen CEOs from public companies around the world.
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