Correlation Between CHINA HUARONG and Henderson Land
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and Henderson Land 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 Henderson Land 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 Henderson Land Development, you can compare the effects of market volatilities on CHINA HUARONG and Henderson Land 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 Henderson Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Henderson Land.
Diversification Opportunities for CHINA HUARONG and Henderson Land
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and Henderson is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Henderson Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Land Devel 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 Henderson Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Land Devel has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Henderson Land go up and down completely randomly.
Pair Corralation between CHINA HUARONG and Henderson Land
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 7.44 times more return on investment than Henderson Land. However, CHINA HUARONG is 7.44 times more volatile than Henderson Land Development. It trades about 0.11 of its potential returns per unit of risk. Henderson Land Development is currently generating about 0.08 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. Henderson Land Development
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| Henderson Land Devel |
CHINA HUARONG and Henderson Land Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and Henderson Land
The main advantage of trading using opposite CHINA HUARONG and Henderson Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, Henderson Land 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 Henderson Land will offset losses from the drop in Henderson Land'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 |
| Henderson Land vs. Superior Plus Corp | Henderson Land vs. SIVERS SEMICONDUCTORS AB | Henderson Land vs. Reliance Steel Aluminum | Henderson Land 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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