Correlation Between China Vanke and Beijing Cisri

Can any of the company-specific risk be diversified away by investing in both China Vanke and Beijing Cisri 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 Vanke and Beijing Cisri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Vanke Co and Beijing Cisri Gaona, you can compare the effects of market volatilities on China Vanke and Beijing Cisri 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 Vanke with a short position of Beijing Cisri. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Vanke and Beijing Cisri.

Diversification Opportunities for China Vanke and Beijing Cisri

0.81

Correlation Coefficient

China Vanke  Beijing Cisri

Very poor diversification

The 3 months correlation between China and Beijing is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding China Vanke Co and Beijing Cisri Gaona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Cisri Gaona and China Vanke 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 Vanke Co are associated (or correlated) with Beijing Cisri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Cisri Gaona has no effect on the direction of China Vanke i.e., China Vanke and Beijing Cisri go up and down completely randomly.

Pair Corralation between China Vanke and Beijing Cisri

Assuming the 90 days trading horizon China Vanke is expected to generate 2.24 times less return on investment than Beijing Cisri. But when comparing it to its historical volatility, China Vanke Co is 1.08 times less risky than Beijing Cisri. It trades about 0.04 of its potential returns per unit of risk. Beijing Cisri Gaona is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,358  in Beijing Cisri Gaona on September 25, 2024 and sell it today you would earn a total of  213.00  from holding Beijing Cisri Gaona or generate 15.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

China Vanke Co  vs.  Beijing Cisri Gaona

China Vanke

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Vanke Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Vanke may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beijing Cisri Gaona

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Cisri Gaona are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Cisri sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Vanke and Beijing Cisri

The main advantage of trading using opposite China Vanke and Beijing Cisri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Vanke position performs unexpectedly, Beijing Cisri 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 Beijing Cisri will offset losses from the drop in Beijing Cisri's long position.

The idea behind China Vanke Co and Beijing Cisri Gaona pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.