Correlation Between CHINA HUARONG and China Overseas
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and China Overseas 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 China Overseas 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 China Overseas Land, you can compare the effects of market volatilities on CHINA HUARONG and China Overseas 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 China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and China Overseas.
Diversification Opportunities for CHINA HUARONG and China Overseas
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and China is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land 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 China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and China Overseas go up and down completely randomly.
Pair Corralation between CHINA HUARONG and China Overseas
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to under-perform the China Overseas. In addition to that, CHINA HUARONG is 7.37 times more volatile than China Overseas Land. It trades about -0.03 of its total potential returns per unit of risk. China Overseas Land is currently generating about -0.1 per unit of volatility. If you would invest 173.00 in China Overseas Land on September 12, 2024 and sell it today you would lose (8.00) from holding China Overseas Land or give up 4.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. China Overseas Land
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| China Overseas Land |
CHINA HUARONG and China Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and China Overseas
The main advantage of trading using opposite CHINA HUARONG and China Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, China Overseas 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 Overseas will offset losses from the drop in China Overseas' long position.| CHINA HUARONG vs. Air Transport Services | CHINA HUARONG vs. Liberty Broadband | CHINA HUARONG vs. TEXAS ROADHOUSE | CHINA HUARONG vs. NORWEGIAN AIR SHUT |
| China Overseas vs. Superior Plus Corp | China Overseas vs. SIVERS SEMICONDUCTORS AB | China Overseas vs. Reliance Steel Aluminum | China Overseas 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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