Correlation Between Charles River and China New
Can any of the company-specific risk be diversified away by investing in both Charles River and China New 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 Charles River and China New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charles River Laboratories and China New Energy, you can compare the effects of market volatilities on Charles River and China New 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 Charles River with a short position of China New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charles River and China New.
Diversification Opportunities for Charles River and China New
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Charles and China is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Charles River Laboratories and China New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China New Energy and Charles River 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 Charles River Laboratories are associated (or correlated) with China New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China New Energy has no effect on the direction of Charles River i.e., Charles River and China New go up and down completely randomly.
Pair Corralation between Charles River and China New
Considering the 90-day investment horizon Charles River Laboratories is expected to under-perform the China New. But the stock apears to be less risky and, when comparing its historical volatility, Charles River Laboratories is 2.37 times less risky than China New. The stock trades about -0.2 of its potential returns per unit of risk. The China New Energy is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 0.40 in China New Energy on November 2, 2024 and sell it today you would earn a total of 0.10 from holding China New Energy or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charles River Laboratories vs. China New Energy
Performance |
| Timeline |
| Charles River Labora |
| China New Energy |
Charles River and China New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charles River and China New
The main advantage of trading using opposite Charles River and China New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles River position performs unexpectedly, China New 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 China New will offset losses from the drop in China New's long position.| Charles River vs. ICON PLC | Charles River vs. Mettler Toledo International | Charles River vs. Laboratory of | Charles River vs. Waters |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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