Correlation Between American States and China Water
Can any of the company-specific risk be diversified away by investing in both American States and China Water 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 American States and China Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American States Water and China Water Affairs, you can compare the effects of market volatilities on American States and China Water 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 American States with a short position of China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and China Water.
Diversification Opportunities for American States and China Water
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and China is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and China Water Affairs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Affairs and American States 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 American States Water are associated (or correlated) with China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Affairs has no effect on the direction of American States i.e., American States and China Water go up and down completely randomly.
Pair Corralation between American States and China Water
Assuming the 90 days horizon American States Water is expected to under-perform the China Water. But the stock apears to be less risky and, when comparing its historical volatility, American States Water is 2.8 times less risky than China Water. The stock trades about -0.01 of its potential returns per unit of risk. The China Water Affairs is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 41.00 in China Water Affairs on October 24, 2024 and sell it today you would earn a total of 15.00 from holding China Water Affairs or generate 36.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.78% |
| Values | Daily Returns |
American States Water vs. China Water Affairs
Performance |
| Timeline |
| American States Water |
| China Water Affairs |
American States and China Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American States and China Water
The main advantage of trading using opposite American States and China Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American States position performs unexpectedly, China Water 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 Water will offset losses from the drop in China Water's long position.| American States vs. Mobilezone Holding AG | American States vs. Cairo Communication SpA | American States vs. Singapore Telecommunications Limited | American States vs. Titan Machinery |
| China Water vs. Sekisui Chemical Co | China Water vs. TRI CHEMICAL LABORATINC | China Water vs. SILICON LABORATOR | China Water vs. CeoTronics AG |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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