Correlation Between Chongqing Changan and China Singapore

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

By analyzing existing cross correlation between Chongqing Changan Automobile and China Singapore Suzhou Industrial, you can compare the effects of market volatilities on Chongqing Changan and China Singapore 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 Chongqing Changan with a short position of China Singapore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Changan and China Singapore.

Diversification Opportunities for Chongqing Changan and China Singapore

0.46

Correlation Coefficient

Chongqing Changan  China Singapore

Very weak diversification

The 3 months correlation between Chongqing and China is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile and China Singapore Suzhou Industr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Singapore Suzhou and Chongqing Changan 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 Chongqing Changan Automobile are associated (or correlated) with China Singapore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Singapore Suzhou has no effect on the direction of Chongqing Changan i.e., Chongqing Changan and China Singapore go up and down completely randomly.

Pair Corralation between Chongqing Changan and China Singapore

Assuming the 90 days trading horizon Chongqing Changan Automobile is expected to under-perform the China Singapore. In addition to that, Chongqing Changan is 1.08 times more volatile than China Singapore Suzhou Industrial. It trades about -0.02 of its total potential returns per unit of risk. China Singapore Suzhou Industrial is currently generating about -0.02 per unit of volatility. If you would invest  751.00  in China Singapore Suzhou Industrial on October 11, 2024 and sell it today you would lose (26.00) from holding China Singapore Suzhou Industrial or give up 3.46% of portfolio value over 90 days.

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

Chongqing Changan Automobile  vs.  China Singapore Suzhou Industr

Chongqing Changan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chongqing Changan Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chongqing Changan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Singapore Suzhou

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Singapore Suzhou Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Singapore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chongqing Changan and China Singapore

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

The idea behind Chongqing Changan Automobile and China Singapore Suzhou Industrial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.