Correlation Between EnTie Commercial and China Development

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

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

Diversification Opportunities for EnTie Commercial and China Development

-0.03

Correlation Coefficient

EnTie Commercial  China Development

Good diversification

The 3 months correlation between EnTie and China is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding EnTie Commercial Bank and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development and EnTie Commercial 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 EnTie Commercial Bank are associated (or correlated) with China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of EnTie Commercial i.e., EnTie Commercial and China Development go up and down completely randomly.

Pair Corralation between EnTie Commercial and China Development

Assuming the 90 days trading horizon EnTie Commercial Bank is expected to under-perform the China Development. In addition to that, EnTie Commercial is 1.09 times more volatile than China Development Financial. It trades about 0.0 of its total potential returns per unit of risk. China Development Financial is currently generating about 0.16 per unit of volatility. If you would invest  1,615  in China Development Financial on September 17, 2024 and sell it today you would earn a total of  195.00  from holding China Development Financial or generate 12.07% return on investment over 90 days.

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

EnTie Commercial Bank  vs.  China Development Financial

EnTie Commercial Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EnTie Commercial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EnTie Commercial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Development

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Development Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Development may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EnTie Commercial and China Development

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

The idea behind EnTie Commercial Bank and China Development Financial 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.