Correlation Between Iat Automobile and China Reform

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

By analyzing existing cross correlation between Iat Automobile Technology and China Reform Health, you can compare the effects of market volatilities on Iat Automobile and China Reform 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 Iat Automobile with a short position of China Reform. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iat Automobile and China Reform.

Diversification Opportunities for Iat Automobile and China Reform

0.24

Correlation Coefficient

Iat Automobile  China Reform

Modest diversification

The 3 months correlation between Iat and China is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Iat Automobile Technology and China Reform Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reform Health and Iat Automobile 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 Iat Automobile Technology are associated (or correlated) with China Reform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reform Health has no effect on the direction of Iat Automobile i.e., Iat Automobile and China Reform go up and down completely randomly.

Pair Corralation between Iat Automobile and China Reform

Assuming the 90 days trading horizon Iat Automobile Technology is expected to generate 1.46 times more return on investment than China Reform. However, Iat Automobile is 1.46 times more volatile than China Reform Health. It trades about -0.22 of its potential returns per unit of risk. China Reform Health is currently generating about -0.5 per unit of risk. If you would invest  1,325  in Iat Automobile Technology on October 12, 2024 and sell it today you would lose (198.00) from holding Iat Automobile Technology or give up 14.94% of portfolio value over 90 days.

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

Iat Automobile Technology  vs.  China Reform Health

Iat Automobile Technology

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Iat Automobile Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Iat Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

China Reform Health

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Iat Automobile and China Reform

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

The idea behind Iat Automobile Technology and China Reform Health 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.