Correlation Between NYSE Composite and China Automotive
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and China Automotive 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 NYSE Composite and China Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and China Automotive Systems, you can compare the effects of market volatilities on NYSE Composite and China Automotive 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 NYSE Composite with a short position of China Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and China Automotive.
Diversification Opportunities for NYSE Composite and China Automotive
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and China Automotive Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Automotive Systems and NYSE Composite 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 NYSE Composite are associated (or correlated) with China Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Automotive Systems has no effect on the direction of NYSE Composite i.e., NYSE Composite and China Automotive go up and down completely randomly.
Pair Corralation between NYSE Composite and China Automotive
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.24 times more return on investment than China Automotive. However, NYSE Composite is 4.17 times less risky than China Automotive. It trades about 0.24 of its potential returns per unit of risk. China Automotive Systems is currently generating about -0.08 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 66,978 from holding NYSE Composite or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. China Automotive Systems
Performance |
| Timeline |
NYSE Composite and China Automotive Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
China Automotive Systems
Pair trading matchups for China Automotive
Pair Trading with NYSE Composite and China Automotive
The main advantage of trading using opposite NYSE Composite and China Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, China Automotive 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 Automotive will offset losses from the drop in China Automotive's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| China Automotive vs. Dorman Products | China Automotive vs. Monro Muffler Brake | China Automotive vs. Standard Motor Products | China Automotive vs. Stoneridge |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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