Correlation Between CHINA HUARONG and New Residential
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and New Residential 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 HUARONG and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and New Residential Investment, you can compare the effects of market volatilities on CHINA HUARONG and New Residential 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 HUARONG with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and New Residential.
Diversification Opportunities for CHINA HUARONG and New Residential
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CHINA and New is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and CHINA HUARONG 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 HUARONG ENERHD 50 are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and New Residential go up and down completely randomly.
Pair Corralation between CHINA HUARONG and New Residential
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 27.62 times more return on investment than New Residential. However, CHINA HUARONG is 27.62 times more volatile than New Residential Investment. It trades about 0.15 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.21 per unit of risk. If you would invest 0.15 in CHINA HUARONG ENERHD 50 on October 29, 2024 and sell it today you would earn a total of 0.00 from holding CHINA HUARONG ENERHD 50 or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. New Residential Investment
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| New Residential Inve |
CHINA HUARONG and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and New Residential
The main advantage of trading using opposite CHINA HUARONG and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| CHINA HUARONG vs. CarsalesCom | CHINA HUARONG vs. CANON MARKETING JP | CHINA HUARONG vs. SCANSOURCE | CHINA HUARONG vs. FLOW TRADERS LTD |
| New Residential vs. CHINA HUARONG ENERHD 50 | New Residential vs. Huntington Bancshares Incorporated | New Residential vs. NorAm Drilling AS | New Residential vs. Rheinmetall AG |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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