Correlation Between Huaxia Fund and CICC Fund

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

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

Diversification Opportunities for Huaxia Fund and CICC Fund

0.89

Correlation Coefficient

Huaxia Fund  CICC Fund

Very poor diversification

The 3 months correlation between Huaxia and CICC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Huaxia Fund Management and CICC Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CICC Fund Management and Huaxia 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 Huaxia Fund Management are associated (or correlated) with CICC Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CICC Fund Management has no effect on the direction of Huaxia Fund i.e., Huaxia Fund and CICC Fund go up and down completely randomly.

Pair Corralation between Huaxia Fund and CICC Fund

Assuming the 90 days trading horizon Huaxia Fund is expected to generate 1.91 times less return on investment than CICC Fund. But when comparing it to its historical volatility, Huaxia Fund Management is 1.05 times less risky than CICC Fund. It trades about 0.1 of its potential returns per unit of risk. CICC Fund Management is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  293.00  in CICC Fund Management on September 19, 2024 and sell it today you would earn a total of  72.00  from holding CICC Fund Management or generate 24.57% return on investment over 90 days.

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

Huaxia Fund Management  vs.  CICC Fund Management

Huaxia Fund Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CICC Fund Management

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Huaxia Fund and CICC Fund

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

The idea behind Huaxia Fund Management and CICC Fund Management 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.