Correlation Between CHINA DEVELOPMENT and ReaLy Development

Can any of the company-specific risk be diversified away by investing in both CHINA DEVELOPMENT and ReaLy 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 CHINA DEVELOPMENT and ReaLy Development 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 ReaLy Development Construction, you can compare the effects of market volatilities on CHINA DEVELOPMENT and ReaLy 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 CHINA DEVELOPMENT with a short position of ReaLy Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA DEVELOPMENT and ReaLy Development.

Diversification Opportunities for CHINA DEVELOPMENT and ReaLy Development

0.64

Correlation Coefficient

CHINA DEVELOPMENT  ReaLy Development

Poor diversification

The 3 months correlation between CHINA and ReaLy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CHINA DEVELOPMENT FINANCIAL and ReaLy Development Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReaLy Development 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 ReaLy Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReaLy Development has no effect on the direction of CHINA DEVELOPMENT i.e., CHINA DEVELOPMENT and ReaLy Development go up and down completely randomly.

Pair Corralation between CHINA DEVELOPMENT and ReaLy Development

Assuming the 90 days trading horizon CHINA DEVELOPMENT is expected to generate 3.36 times less return on investment than ReaLy Development. But when comparing it to its historical volatility, CHINA DEVELOPMENT FINANCIAL is 8.1 times less risky than ReaLy Development. It trades about 0.36 of its potential returns per unit of risk. ReaLy Development Construction is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,070  in ReaLy Development Construction on October 12, 2024 and sell it today you would earn a total of  170.00  from holding ReaLy Development Construction or generate 4.18% return on investment over 90 days.

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

CHINA DEVELOPMENT FINANCIAL  vs.  ReaLy Development Construction

CHINA DEVELOPMENT

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA DEVELOPMENT FINANCIAL are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CHINA DEVELOPMENT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ReaLy Development

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ReaLy Development Construction are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ReaLy Development showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA DEVELOPMENT and ReaLy Development

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

The idea behind CHINA DEVELOPMENT FINANCIAL and ReaLy Development Construction 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.