Correlation Between China Railway and New Residential

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

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

Diversification Opportunities for China Railway and New Residential

-0.3

Correlation Coefficient

China Railway  New Residential

Very good diversification

The 3 months correlation between China and New is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and China Railway 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 Railway Construction are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of China Railway i.e., China Railway and New Residential go up and down completely randomly.

Pair Corralation between China Railway and New Residential

If you would invest  957.00  in New Residential Investment on October 7, 2024 and sell it today you would earn a total of  123.00  from holding New Residential Investment or generate 12.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

China Railway Construction  vs.  New Residential Investment

China Railway Constr

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

New Residential Inve

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, New Residential reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Railway and New Residential

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

The idea behind China Railway Construction and New Residential Investment 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.