Correlation Between Sichuan Expressway and Ferrovial
Can any of the company-specific risk be diversified away by investing in both Sichuan Expressway and Ferrovial 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 Sichuan Expressway and Ferrovial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sichuan Expressway and Ferrovial SA, you can compare the effects of market volatilities on Sichuan Expressway and Ferrovial 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 Sichuan Expressway with a short position of Ferrovial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Expressway and Ferrovial.
Diversification Opportunities for Sichuan Expressway and Ferrovial
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sichuan and Ferrovial is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Expressway and Ferrovial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrovial SA and Sichuan Expressway 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 Sichuan Expressway are associated (or correlated) with Ferrovial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrovial SA has no effect on the direction of Sichuan Expressway i.e., Sichuan Expressway and Ferrovial go up and down completely randomly.
Pair Corralation between Sichuan Expressway and Ferrovial
Assuming the 90 days horizon Sichuan Expressway is expected to generate 0.85 times more return on investment than Ferrovial. However, Sichuan Expressway is 1.17 times less risky than Ferrovial. It trades about 0.09 of its potential returns per unit of risk. Ferrovial SA is currently generating about 0.03 per unit of risk. If you would invest 24.00 in Sichuan Expressway on November 2, 2024 and sell it today you would earn a total of 5.00 from holding Sichuan Expressway or generate 20.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sichuan Expressway vs. Ferrovial SA
Performance |
| Timeline |
| Sichuan Expressway |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ferrovial SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Sichuan Expressway and Ferrovial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sichuan Expressway and Ferrovial
The main advantage of trading using opposite Sichuan Expressway and Ferrovial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Expressway position performs unexpectedly, Ferrovial 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 Ferrovial will offset losses from the drop in Ferrovial's long position.The idea behind Sichuan Expressway and Ferrovial SA 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.| Ferrovial vs. Vinci SA ADR | Ferrovial vs. Geberit AG ADR | Ferrovial vs. Kone Oyj ADR | Ferrovial vs. Kuehne Nagel International |
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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