Correlation Between Ping An and China Water
Can any of the company-specific risk be diversified away by investing in both Ping An 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 Ping An and China Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ping An Insurance and China Water Affairs, you can compare the effects of market volatilities on Ping An 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 Ping An with a short position of China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and China Water.
Diversification Opportunities for Ping An and China Water
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ping and China is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance 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 Ping An 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 Ping An Insurance 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 Ping An i.e., Ping An and China Water go up and down completely randomly.
Pair Corralation between Ping An and China Water
Assuming the 90 days trading horizon Ping An Insurance is expected to generate 1.29 times more return on investment than China Water. However, Ping An is 1.29 times more volatile than China Water Affairs. It trades about -0.05 of its potential returns per unit of risk. China Water Affairs is currently generating about -0.06 per unit of risk. If you would invest 565.00 in Ping An Insurance on September 4, 2024 and sell it today you would lose (21.00) from holding Ping An Insurance or give up 3.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ping An Insurance vs. China Water Affairs
Performance |
| Timeline |
| Ping An Insurance |
| China Water Affairs |
Ping An and China Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ping An and China Water
The main advantage of trading using opposite Ping An and China Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An 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.The idea behind Ping An Insurance and China Water Affairs 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 Water vs. RETAIL FOOD GROUP | China Water vs. KINGBOARD CHEMICAL | China Water vs. Fast Retailing Co | China Water vs. SCANSOURCE |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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