Correlation Between CICC Fund and China Railway

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

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

Diversification Opportunities for CICC Fund and China Railway

-0.64

Correlation Coefficient

CICC Fund  China Railway

Excellent diversification

The 3 months correlation between CICC and China is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding CICC Fund Management and China Railway Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Materials and CICC Fund 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 CICC Fund Management are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Materials has no effect on the direction of CICC Fund i.e., CICC Fund and China Railway go up and down completely randomly.

Pair Corralation between CICC Fund and China Railway

Assuming the 90 days trading horizon CICC Fund Management is expected to generate 0.79 times more return on investment than China Railway. However, CICC Fund Management is 1.27 times less risky than China Railway. It trades about 0.36 of its potential returns per unit of risk. China Railway Materials is currently generating about -0.15 per unit of risk. If you would invest  325.00  in CICC Fund Management on October 25, 2024 and sell it today you would earn a total of  67.00  from holding CICC Fund Management or generate 20.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

CICC Fund Management  vs.  China Railway Materials

CICC Fund Management

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CICC Fund Management are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CICC Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

China Railway Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Railway Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CICC Fund and China Railway

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

The idea behind CICC Fund Management and China Railway Materials 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..