Correlation Between China Shenhua and HomeToGo
Can any of the company-specific risk be diversified away by investing in both China Shenhua and HomeToGo 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 Shenhua and HomeToGo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Shenhua Energy and HomeToGo SE, you can compare the effects of market volatilities on China Shenhua and HomeToGo 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 Shenhua with a short position of HomeToGo. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and HomeToGo.
Diversification Opportunities for China Shenhua and HomeToGo
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and HomeToGo is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE and China Shenhua 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 Shenhua Energy are associated (or correlated) with HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of China Shenhua i.e., China Shenhua and HomeToGo go up and down completely randomly.
Pair Corralation between China Shenhua and HomeToGo
Assuming the 90 days horizon China Shenhua is expected to generate 2.23 times less return on investment than HomeToGo. But when comparing it to its historical volatility, China Shenhua Energy is 1.05 times less risky than HomeToGo. It trades about 0.03 of its potential returns per unit of risk. HomeToGo SE is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 200.00 in HomeToGo SE on September 12, 2024 and sell it today you would earn a total of 14.00 from holding HomeToGo SE or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Shenhua Energy vs. HomeToGo SE
Performance |
| Timeline |
| China Shenhua Energy |
| HomeToGo SE |
China Shenhua and HomeToGo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Shenhua and HomeToGo
The main advantage of trading using opposite China Shenhua and HomeToGo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Shenhua position performs unexpectedly, HomeToGo 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 HomeToGo will offset losses from the drop in HomeToGo's long position.| China Shenhua vs. HomeToGo SE | China Shenhua vs. American Homes 4 | China Shenhua vs. Autohome ADR | China Shenhua vs. CENTURIA OFFICE REIT |
| HomeToGo vs. Tencent Holdings | HomeToGo vs. Superior Plus Corp | HomeToGo vs. SIVERS SEMICONDUCTORS AB | HomeToGo vs. NorAm Drilling AS |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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