Correlation Between NOHO and China Overseas
Can any of the company-specific risk be diversified away by investing in both NOHO and China Overseas 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 NOHO and China Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NOHO Inc and China Overseas Land, you can compare the effects of market volatilities on NOHO and China Overseas 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 NOHO with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOHO and China Overseas.
Diversification Opportunities for NOHO and China Overseas
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NOHO and China is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding NOHO Inc and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and NOHO 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 NOHO Inc are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of NOHO i.e., NOHO and China Overseas go up and down completely randomly.
Pair Corralation between NOHO and China Overseas
Given the investment horizon of 90 days NOHO Inc is expected to generate 6.4 times more return on investment than China Overseas. However, NOHO is 6.4 times more volatile than China Overseas Land. It trades about 0.15 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.01 per unit of risk. If you would invest 0.03 in NOHO Inc on August 24, 2024 and sell it today you would lose (0.01) from holding NOHO Inc or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 89.49% |
| Values | Daily Returns |
NOHO Inc vs. China Overseas Land
Performance |
| Timeline |
| NOHO Inc |
| China Overseas Land |
NOHO and China Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NOHO and China Overseas
The main advantage of trading using opposite NOHO and China Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOHO position performs unexpectedly, China Overseas 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 Overseas will offset losses from the drop in China Overseas' long position.The idea behind NOHO Inc and China Overseas Land pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Overseas vs. Sun Hung Kai | China Overseas vs. China Overseas Land | China Overseas vs. EGRNF | China Overseas vs. Sino Land Co |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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