Correlation Between China Asset and Industrial Bank

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

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

Diversification Opportunities for China Asset and Industrial Bank

0.62

Correlation Coefficient

China Asset  Industrial Bank

Poor diversification

The 3 months correlation between China and Industrial is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding China Asset Management and Industrial Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and China Asset 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 Asset Management are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of China Asset i.e., China Asset and Industrial Bank go up and down completely randomly.

Pair Corralation between China Asset and Industrial Bank

Assuming the 90 days trading horizon China Asset is expected to generate 1.27 times less return on investment than Industrial Bank. In addition to that, China Asset is 1.03 times more volatile than Industrial Bank Co. It trades about 0.12 of its total potential returns per unit of risk. Industrial Bank Co is currently generating about 0.16 per unit of volatility. If you would invest  1,922  in Industrial Bank Co on December 26, 2024 and sell it today you would earn a total of  226.00  from holding Industrial Bank Co or generate 11.76% return on investment over 90 days.

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

China Asset Management  vs.  Industrial Bank Co

China Asset Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Industrial Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Asset and Industrial Bank

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

The idea behind China Asset Management and Industrial Bank 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.