Correlation Between China Railway and AVIC Fund

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

By analyzing existing cross correlation between China Railway Materials and AVIC Fund Management, you can compare the effects of market volatilities on China Railway and AVIC Fund 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 Railway with a short position of AVIC Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and AVIC Fund.

Diversification Opportunities for China Railway and AVIC Fund

-0.57

Correlation Coefficient

China Railway  AVIC Fund

Excellent diversification

The 3 months correlation between China and AVIC is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Materials and AVIC Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC Fund Management and China Railway 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 Railway Materials are associated (or correlated) with AVIC Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC Fund Management has no effect on the direction of China Railway i.e., China Railway and AVIC Fund go up and down completely randomly.

Pair Corralation between China Railway and AVIC Fund

Assuming the 90 days trading horizon China Railway Materials is expected to under-perform the AVIC Fund. In addition to that, China Railway is 1.36 times more volatile than AVIC Fund Management. It trades about -0.04 of its total potential returns per unit of risk. AVIC Fund Management is currently generating about 0.25 per unit of volatility. If you would invest  1,050  in AVIC Fund Management on December 23, 2024 and sell it today you would earn a total of  154.00  from holding AVIC Fund Management or generate 14.67% return on investment over 90 days.

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

China Railway Materials  vs.  AVIC Fund Management

China Railway Materials

Risk-Adjusted Performance

Very Weak

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

AVIC Fund Management

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC Fund Management are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Railway and AVIC Fund

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

The idea behind China Railway Materials and AVIC Fund Management 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .