Correlation Between CHINA HUARONG and Aozora Bank
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and Aozora Bank 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 Aozora Bank 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 Aozora Bank, you can compare the effects of market volatilities on CHINA HUARONG and Aozora Bank 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 Aozora Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Aozora Bank.
Diversification Opportunities for CHINA HUARONG and Aozora Bank
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHINA and Aozora is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank 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 Aozora Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aozora Bank has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Aozora Bank go up and down completely randomly.
Pair Corralation between CHINA HUARONG and Aozora Bank
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 26.87 times more return on investment than Aozora Bank. However, CHINA HUARONG is 26.87 times more volatile than Aozora Bank. It trades about 0.07 of its potential returns per unit of risk. Aozora Bank is currently generating about -0.06 per unit of risk. If you would invest 0.15 in CHINA HUARONG ENERHD 50 on October 22, 2024 and sell it today you would lose (0.05) from holding CHINA HUARONG ENERHD 50 or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. Aozora Bank
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| Aozora Bank |
CHINA HUARONG and Aozora Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and Aozora Bank
The main advantage of trading using opposite CHINA HUARONG and Aozora Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, Aozora Bank 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 Aozora Bank will offset losses from the drop in Aozora Bank's long position.| CHINA HUARONG vs. YATRA ONLINE DL 0001 | CHINA HUARONG vs. Lamar Advertising | CHINA HUARONG vs. GWILLI FOOD | CHINA HUARONG vs. PLANT VEDA FOODS |
| Aozora Bank vs. JPMorgan Chase Co | Aozora Bank vs. Bank of America | Aozora Bank vs. China Construction Bank | Aozora Bank vs. HSBC Holdings plc |
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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