Correlation Between Chengdu Kanghua and AVIC (Chengdu)

Can any of the company-specific risk be diversified away by investing in both Chengdu Kanghua and AVIC (Chengdu) 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 Chengdu Kanghua and AVIC (Chengdu) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chengdu Kanghua Biological and AVIC UAS Co, you can compare the effects of market volatilities on Chengdu Kanghua and AVIC (Chengdu) 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 Chengdu Kanghua with a short position of AVIC (Chengdu). Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Kanghua and AVIC (Chengdu).

Diversification Opportunities for Chengdu Kanghua and AVIC (Chengdu)

0.8

Correlation Coefficient

Chengdu Kanghua  AVIC (Chengdu)

Very poor diversification

The 3 months correlation between Chengdu and AVIC is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Kanghua Biological and AVIC UAS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC (Chengdu) and Chengdu Kanghua 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 Chengdu Kanghua Biological are associated (or correlated) with AVIC (Chengdu). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC (Chengdu) has no effect on the direction of Chengdu Kanghua i.e., Chengdu Kanghua and AVIC (Chengdu) go up and down completely randomly.

Pair Corralation between Chengdu Kanghua and AVIC (Chengdu)

Assuming the 90 days trading horizon Chengdu Kanghua is expected to generate 1.17 times less return on investment than AVIC (Chengdu). But when comparing it to its historical volatility, Chengdu Kanghua Biological is 1.21 times less risky than AVIC (Chengdu). It trades about 0.07 of its potential returns per unit of risk. AVIC UAS Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,068  in AVIC UAS Co on December 24, 2024 and sell it today you would earn a total of  323.00  from holding AVIC UAS Co or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Chengdu Kanghua Biological  vs.  AVIC UAS Co

Chengdu Kanghua Biol

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Kanghua Biological are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Kanghua may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AVIC (Chengdu)

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC UAS Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC (Chengdu) may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chengdu Kanghua and AVIC (Chengdu)

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

The idea behind Chengdu Kanghua Biological and AVIC UAS Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.