Correlation Between China Railway and WIMFARM SA

Can any of the company-specific risk be diversified away by investing in both China Railway and WIMFARM SA 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 WIMFARM SA 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 WIMFARM SA EO, you can compare the effects of market volatilities on China Railway and WIMFARM SA 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 WIMFARM SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and WIMFARM SA.

Diversification Opportunities for China Railway and WIMFARM SA

0.09

Correlation Coefficient

China Railway  WIMFARM SA

Significant diversification

The 3 months correlation between China and WIMFARM is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO 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 WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of China Railway i.e., China Railway and WIMFARM SA go up and down completely randomly.

Pair Corralation between China Railway and WIMFARM SA

If you would invest  322.00  in WIMFARM SA EO on October 25, 2024 and sell it today you would earn a total of  55.00  from holding WIMFARM SA EO or generate 17.08% return on investment over 90 days.

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

China Railway Construction  vs.  WIMFARM SA EO

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 nearly stable basic indicators, China Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WIMFARM SA EO

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WIMFARM SA EO are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WIMFARM SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Railway and WIMFARM SA

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

The idea behind China Railway Construction and WIMFARM SA EO 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.