Correlation Between China Asset and Peoples Insurance

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

Diversification Opportunities for China Asset and Peoples Insurance

0.29

Correlation Coefficient

China Asset  Peoples Insurance

Modest diversification

The 3 months correlation between China and Peoples is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Asset Management and Peoples Insurance of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples Insurance 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 Peoples Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Insurance has no effect on the direction of China Asset i.e., China Asset and Peoples Insurance go up and down completely randomly.

Pair Corralation between China Asset and Peoples Insurance

Assuming the 90 days trading horizon China Asset Management is expected to generate 0.58 times more return on investment than Peoples Insurance. However, China Asset Management is 1.73 times less risky than Peoples Insurance. It trades about 0.27 of its potential returns per unit of risk. Peoples Insurance of is currently generating about 0.1 per unit of risk. If you would invest  313.00  in China Asset Management on September 30, 2024 and sell it today you would earn a total of  43.00  from holding China Asset Management or generate 13.74% return on investment over 90 days.

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

China Asset Management  vs.  Peoples Insurance of

China Asset Management

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 14 (%) 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 January 2025.

Peoples Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Peoples Insurance of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Peoples Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Asset and Peoples Insurance

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

The idea behind China Asset Management and Peoples Insurance of 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.