Correlation Between China Development and Sinyi Realty

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

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

Diversification Opportunities for China Development and Sinyi Realty

0.86

Correlation Coefficient

China Development  Sinyi Realty

Very poor diversification

The 3 months correlation between China and Sinyi is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Sinyi Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinyi Realty and China Development 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 Development Financial are associated (or correlated) with Sinyi Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinyi Realty has no effect on the direction of China Development i.e., China Development and Sinyi Realty go up and down completely randomly.

Pair Corralation between China Development and Sinyi Realty

Assuming the 90 days trading horizon China Development Financial is expected to generate 1.38 times more return on investment than Sinyi Realty. However, China Development is 1.38 times more volatile than Sinyi Realty. It trades about 0.08 of its potential returns per unit of risk. Sinyi Realty is currently generating about 0.1 per unit of risk. If you would invest  1,755  in China Development Financial on December 27, 2024 and sell it today you would earn a total of  85.00  from holding China Development Financial or generate 4.84% return on investment over 90 days.

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

China Development Financial  vs.  Sinyi Realty

China Development

Risk-Adjusted Performance

Modest

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 stable basic indicators, China Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sinyi Realty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinyi Realty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sinyi Realty is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Development and Sinyi Realty

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

The idea behind China Development Financial and Sinyi Realty 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.