Correlation Between CHINA HUARONG and Daiwa House
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and Daiwa House 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 Daiwa House 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 Daiwa House Industry, you can compare the effects of market volatilities on CHINA HUARONG and Daiwa House 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 Daiwa House. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Daiwa House.
Diversification Opportunities for CHINA HUARONG and Daiwa House
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CHINA and Daiwa is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Daiwa House Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa House Industry 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 Daiwa House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa House Industry has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Daiwa House go up and down completely randomly.
Pair Corralation between CHINA HUARONG and Daiwa House
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 24.89 times more return on investment than Daiwa House. However, CHINA HUARONG is 24.89 times more volatile than Daiwa House Industry. It trades about 0.11 of its potential returns per unit of risk. Daiwa House Industry is currently generating about 0.05 per unit of risk. If you would invest 0.50 in CHINA HUARONG ENERHD 50 on September 12, 2024 and sell it today you would lose (0.35) from holding CHINA HUARONG ENERHD 50 or give up 70.0% of portfolio value 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. Daiwa House Industry
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| Daiwa House Industry |
CHINA HUARONG and Daiwa House Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and Daiwa House
The main advantage of trading using opposite CHINA HUARONG and Daiwa House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, Daiwa House 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 Daiwa House will offset losses from the drop in Daiwa House'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 |
| Daiwa House vs. Superior Plus Corp | Daiwa House vs. SIVERS SEMICONDUCTORS AB | Daiwa House vs. Reliance Steel Aluminum | Daiwa House 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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