Correlation Between Changchun High and Agricultural Bank

Can any of the company-specific risk be diversified away by investing in both Changchun High and Agricultural Bank 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 Changchun High and Agricultural Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changchun High New and Agricultural Bank of, you can compare the effects of market volatilities on Changchun High and Agricultural Bank 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 Changchun High with a short position of Agricultural Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun High and Agricultural Bank.

Diversification Opportunities for Changchun High and Agricultural Bank

0.17

Correlation Coefficient

Changchun High  Agricultural Bank

Average diversification

The 3 months correlation between Changchun and Agricultural is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Changchun High New and Agricultural Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural Bank and Changchun High 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 Changchun High New are associated (or correlated) with Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of Changchun High i.e., Changchun High and Agricultural Bank go up and down completely randomly.

Pair Corralation between Changchun High and Agricultural Bank

Assuming the 90 days trading horizon Changchun High New is expected to generate 2.33 times more return on investment than Agricultural Bank. However, Changchun High is 2.33 times more volatile than Agricultural Bank of. It trades about 0.07 of its potential returns per unit of risk. Agricultural Bank of is currently generating about 0.09 per unit of risk. If you would invest  9,082  in Changchun High New on September 26, 2024 and sell it today you would earn a total of  977.00  from holding Changchun High New or generate 10.76% return on investment over 90 days.

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

Changchun High New  vs.  Agricultural Bank of

Changchun High New

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun High New are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun High sustained solid returns over the last few months and may actually be approaching a breakup point.

Agricultural Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agricultural Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Changchun High and Agricultural Bank

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

The idea behind Changchun High New and Agricultural Bank of 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.