Correlation Between China Vanke and China Enterprise

Can any of the company-specific risk be diversified away by investing in both China Vanke and China Enterprise 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 China Enterprise 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 China Enterprise Co, you can compare the effects of market volatilities on China Vanke and China Enterprise 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 China Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Vanke and China Enterprise.

Diversification Opportunities for China Vanke and China Enterprise

0.56

Correlation Coefficient

China Vanke  China Enterprise

Very weak diversification

The 3 months correlation between China and China is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Vanke Co and China Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Enterprise 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 China Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Enterprise has no effect on the direction of China Vanke i.e., China Vanke and China Enterprise go up and down completely randomly.

Pair Corralation between China Vanke and China Enterprise

Assuming the 90 days trading horizon China Vanke Co is expected to under-perform the China Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, China Vanke Co is 1.16 times less risky than China Enterprise. The stock trades about -0.22 of its potential returns per unit of risk. The China Enterprise Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  297.00  in China Enterprise Co on October 13, 2024 and sell it today you would lose (37.00) from holding China Enterprise Co or give up 12.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

China Vanke Co  vs.  China Enterprise Co

China Vanke

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Vanke Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with China Vanke and China Enterprise

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

The idea behind China Vanke Co and China Enterprise Co 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.