Correlation Between President Securities and China Development

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

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

Diversification Opportunities for President Securities and China Development

0.33

Correlation Coefficient

President Securities  China Development

Weak diversification

The 3 months correlation between President and China is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding President Securities Corp and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development and President Securities 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 President Securities Corp 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 President Securities i.e., President Securities and China Development go up and down completely randomly.

Pair Corralation between President Securities and China Development

Assuming the 90 days trading horizon President Securities is expected to generate 4.66 times less return on investment than China Development. But when comparing it to its historical volatility, President Securities Corp is 1.35 times less risky than China Development. It trades about 0.02 of its potential returns per unit of risk. China Development Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,640  in China Development Financial on October 9, 2024 and sell it today you would earn a total of  105.00  from holding China Development Financial or generate 6.4% return on investment over 90 days.

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

President Securities Corp  vs.  China Development Financial

President Securities Corp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in President Securities Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, President Securities 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

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Development Financial are ranked lower than 6 (%) 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 February 2025.

Pair Trading with President Securities and China Development

The main advantage of trading using opposite President Securities and China Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if President Securities 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 President Securities Corp 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.

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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.