Correlation Between ECHO INVESTMENT and New China

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Can any of the company-specific risk be diversified away by investing in both ECHO INVESTMENT and New China 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 ECHO INVESTMENT and New China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECHO INVESTMENT ZY and New China Life, you can compare the effects of market volatilities on ECHO INVESTMENT and New China 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 ECHO INVESTMENT with a short position of New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and New China.

Diversification Opportunities for ECHO INVESTMENT and New China

ECHONewDiversified AwayECHONewDiversified Away100%
-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between ECHO and New is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and New China Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New China Life and ECHO INVESTMENT 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 ECHO INVESTMENT ZY are associated (or correlated) with New China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New China Life has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and New China go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and New China

Assuming the 90 days horizon ECHO INVESTMENT is expected to generate 218.2 times less return on investment than New China. But when comparing it to its historical volatility, ECHO INVESTMENT ZY is 1.39 times less risky than New China. It trades about 0.0 of its potential returns per unit of risk. New China Life is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  296.00  in New China Life on November 18, 2024 and sell it today you would earn a total of  14.00  from holding New China Life or generate 4.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ECHO INVESTMENT ZY  vs.  New China Life

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.154I3 NCL
       Timeline  
ECHO INVESTMENT ZY 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ECHO INVESTMENT ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ECHO INVESTMENT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.021.041.061.081.11.12
New China Life 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in New China Life are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, New China may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2.72.82.933.1

ECHO INVESTMENT and New China Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.02-2.27-1.51-0.750.00.731.462.192.92 0.040.050.060.070.080.090.100.11
JavaScript chart by amCharts 3.21.154I3 NCL
       Returns  

Pair Trading with ECHO INVESTMENT and New China

The main advantage of trading using opposite ECHO INVESTMENT and New China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECHO INVESTMENT position performs unexpectedly, New China 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 China will offset losses from the drop in New China's long position.
The idea behind ECHO INVESTMENT ZY and New China Life 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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