Correlation Between CHINA HUARONG and CapitaLand Investment
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and CapitaLand Investment 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 CapitaLand Investment 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 CapitaLand Investment Limited, you can compare the effects of market volatilities on CHINA HUARONG and CapitaLand Investment 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 CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and CapitaLand Investment.
Diversification Opportunities for CHINA HUARONG and CapitaLand Investment
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between CHINA and CapitaLand is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and CapitaLand Investment go up and down completely randomly.
Pair Corralation between CHINA HUARONG and CapitaLand Investment
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 28.78 times more return on investment than CapitaLand Investment. However, CHINA HUARONG is 28.78 times more volatile than CapitaLand Investment Limited. It trades about 0.13 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about -0.01 per unit of risk. If you would invest 0.30 in CHINA HUARONG ENERHD 50 on September 12, 2024 and sell it today you would lose (0.15) from holding CHINA HUARONG ENERHD 50 or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. CapitaLand Investment Limited
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| CapitaLand Investment |
CHINA HUARONG and CapitaLand Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and CapitaLand Investment
The main advantage of trading using opposite CHINA HUARONG and CapitaLand Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, CapitaLand Investment 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 CapitaLand Investment will offset losses from the drop in CapitaLand Investment's long position.| CHINA HUARONG vs. Air Transport Services | CHINA HUARONG vs. Liberty Broadband | CHINA HUARONG vs. TEXAS ROADHOUSE | CHINA HUARONG vs. NORWEGIAN AIR SHUT |
| CapitaLand Investment vs. Superior Plus Corp | CapitaLand Investment vs. SIVERS SEMICONDUCTORS AB | CapitaLand Investment vs. Reliance Steel Aluminum | CapitaLand Investment vs. CHINA HUARONG ENERHD 50 |
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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