Correlation Between Henderson Land and China Life
Can any of the company-specific risk be diversified away by investing in both Henderson Land and China Life 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 Henderson Land and China Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Henderson Land Development and China Life Insurance, you can compare the effects of market volatilities on Henderson Land and China Life 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 Henderson Land with a short position of China Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henderson Land and China Life.
Diversification Opportunities for Henderson Land and China Life
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Henderson and China is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Henderson Land Development and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and Henderson Land 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 Henderson Land Development are associated (or correlated) with China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Henderson Land i.e., Henderson Land and China Life go up and down completely randomly.
Pair Corralation between Henderson Land and China Life
Assuming the 90 days horizon Henderson Land is expected to generate 4.92 times less return on investment than China Life. But when comparing it to its historical volatility, Henderson Land Development is 2.04 times less risky than China Life. It trades about 0.04 of its potential returns per unit of risk. China Life Insurance is currently generating about 0.08 of returns per unit of risk over similar time horizon. 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Henderson Land Development vs. China Life Insurance
Performance |
| Timeline |
| Henderson Land Devel |
| China Life Insurance |
Henderson Land and China Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Henderson Land and China Life
The main advantage of trading using opposite Henderson Land and China Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henderson Land position performs unexpectedly, China Life 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 Life will offset losses from the drop in China Life's long position.| Henderson Land vs. Hang Lung Properties | Henderson Land vs. Sun Hung Kai | Henderson Land vs. Hong Kong and | Henderson Land vs. New World Development |
| China Life vs. CNO Financial Group | China Life vs. Ping An Insurance | China Life vs. Lincoln National | China Life vs. AIA Group Ltd |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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