Correlation Between 159005 and China Railway

Can any of the company-specific risk be diversified away by investing in both 159005 and China Railway 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 159005 and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 159005 and China Railway Materials, you can compare the effects of market volatilities on 159005 and China Railway 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 159005 with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of 159005 and China Railway.

Diversification Opportunities for 159005 and China Railway

0.88

Correlation Coefficient

159005  China Railway

Very poor diversification

The 3 months correlation between 159005 and China is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding 159005 and China Railway Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Materials and 159005 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 159005 are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Materials has no effect on the direction of 159005 i.e., 159005 and China Railway go up and down completely randomly.

Pair Corralation between 159005 and China Railway

Assuming the 90 days trading horizon 159005 is expected to generate 2.47 times less return on investment than China Railway. But when comparing it to its historical volatility, 159005 is 65.74 times less risky than China Railway. It trades about 0.21 of its potential returns per unit of risk. China Railway Materials is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  279.00  in China Railway Materials on September 23, 2024 and sell it today you would earn a total of  0.00  from holding China Railway Materials or generate 0.0% return on investment over 90 days.

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

159005  vs.  China Railway Materials

159005

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 159005 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 159005 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Railway Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Railway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 159005 and China Railway

The main advantage of trading using opposite 159005 and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 159005 position performs unexpectedly, China Railway 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 Railway will offset losses from the drop in China Railway's long position.

The idea behind 159005 and China Railway Materials 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..