Correlation Between Snap and China Fund
Can any of the company-specific risk be diversified away by investing in both Snap and China Fund 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 Snap and China Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and China Fund, you can compare the effects of market volatilities on Snap and China Fund 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 Snap with a short position of China Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and China Fund.
Diversification Opportunities for Snap and China Fund
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and China is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fund and Snap 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 Snap Inc are associated (or correlated) with China Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fund has no effect on the direction of Snap i.e., Snap and China Fund go up and down completely randomly.
Pair Corralation between Snap and China Fund
Given the investment horizon of 90 days Snap Inc is expected to generate 2.07 times more return on investment than China Fund. However, Snap is 2.07 times more volatile than China Fund. It trades about 0.1 of its potential returns per unit of risk. China Fund is currently generating about -0.19 per unit of risk. If you would invest 1,071 in Snap Inc on August 28, 2024 and sell it today you would earn a total of 89.00 from holding Snap Inc or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. China Fund
Performance |
| Timeline |
| Snap Inc |
| China Fund |
Snap and China Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and China Fund
The main advantage of trading using opposite Snap and China Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, China Fund 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 Fund will offset losses from the drop in China Fund's long position.The idea behind Snap Inc and China Fund 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 Fund vs. Ashmore Group Plc | China Fund vs. Mexico Equity And | China Fund vs. Western Asset Managed | China Fund vs. Blackrock Muniholdings Quality |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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