Correlation Between CHINA HUARONG and Great West
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and Great West 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 Great West 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 Great West Lifeco, you can compare the effects of market volatilities on CHINA HUARONG and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Great West.
Diversification Opportunities for CHINA HUARONG and Great West
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CHINA and Great is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Great West go up and down completely randomly.
Pair Corralation between CHINA HUARONG and Great West
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 41.87 times more return on investment than Great West. However, CHINA HUARONG is 41.87 times more volatile than Great West Lifeco. It trades about 0.13 of its potential returns per unit of risk. Great West Lifeco is currently generating about 0.08 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. Great West Lifeco
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| Great West Lifeco |
CHINA HUARONG and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and Great West
The main advantage of trading using opposite CHINA HUARONG and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, Great West 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 Great West will offset losses from the drop in Great West'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 |
| Great West vs. Superior Plus Corp | Great West vs. SIVERS SEMICONDUCTORS AB | Great West vs. CHINA HUARONG ENERHD 50 | Great West vs. NORDIC HALIBUT AS |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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