Correlation Between Huaxia Fund and AVIC Fund

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

Diversification Opportunities for Huaxia Fund and AVIC Fund

0.84

Correlation Coefficient

Huaxia Fund  AVIC Fund

Very poor diversification

The 3 months correlation between Huaxia and AVIC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Huaxia Fund Management and AVIC Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC 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 AVIC Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC Fund Management has no effect on the direction of Huaxia Fund i.e., Huaxia Fund and AVIC Fund go up and down completely randomly.

Pair Corralation between Huaxia Fund and AVIC Fund

Assuming the 90 days trading horizon Huaxia Fund is expected to generate 1.15 times less return on investment than AVIC Fund. In addition to that, Huaxia Fund is 1.41 times more volatile than AVIC Fund Management. It trades about 0.04 of its total potential returns per unit of risk. AVIC Fund Management is currently generating about 0.07 per unit of volatility. If you would invest  884.00  in AVIC Fund Management on October 5, 2024 and sell it today you would earn a total of  183.00  from holding AVIC Fund Management or generate 20.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.06%
Values	Daily Returns

Huaxia Fund Management  vs.  AVIC Fund Management

Huaxia Fund Management

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

AVIC Fund Management

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC Fund Management are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC Fund may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Huaxia Fund and AVIC Fund

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

The idea behind Huaxia Fund Management and AVIC 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.