Correlation Between Porton Fine and China Railway

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

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

Diversification Opportunities for Porton Fine and China Railway

0.07

Correlation Coefficient

Porton Fine  China Railway

Significant diversification

The 3 months correlation between Porton and China is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Porton Fine Chemicals and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr and Porton Fine 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 Porton Fine Chemicals 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 Constr has no effect on the direction of Porton Fine i.e., Porton Fine and China Railway go up and down completely randomly.

Pair Corralation between Porton Fine and China Railway

Assuming the 90 days trading horizon Porton Fine Chemicals is expected to generate 2.25 times more return on investment than China Railway. However, Porton Fine is 2.25 times more volatile than China Railway Construction. It trades about 0.0 of its potential returns per unit of risk. China Railway Construction is currently generating about -0.22 per unit of risk. If you would invest  1,676  in Porton Fine Chemicals on December 25, 2024 and sell it today you would lose (28.00) from holding Porton Fine Chemicals or give up 1.67% of portfolio value over 90 days.

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

Porton Fine Chemicals  vs.  China Railway Construction

Porton Fine Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Porton Fine Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Porton Fine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Railway Constr

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Railway Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Porton Fine and China Railway

The main advantage of trading using opposite Porton Fine and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porton Fine 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 Porton Fine Chemicals and China Railway 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.