Correlation Between Broadridge Financial and China Railway

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

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

Diversification Opportunities for Broadridge Financial and China Railway

0.44

Correlation Coefficient

Broadridge Financial  China Railway

Very weak diversification

The 3 months correlation between Broadridge and China is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Broadridge Financial Solutions and China Railway Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Signal and Broadridge Financial 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 Broadridge Financial Solutions 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 Signal has no effect on the direction of Broadridge Financial i.e., Broadridge Financial and China Railway go up and down completely randomly.

Pair Corralation between Broadridge Financial and China Railway

Assuming the 90 days horizon Broadridge Financial is expected to generate 8.9 times less return on investment than China Railway. But when comparing it to its historical volatility, Broadridge Financial Solutions is 7.32 times less risky than China Railway. It trades about 0.07 of its potential returns per unit of risk. China Railway Signal is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15.00  in China Railway Signal on October 12, 2024 and sell it today you would earn a total of  24.00  from holding China Railway Signal or generate 160.0% return on investment over 90 days.

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

Broadridge Financial Solutions  vs.  China Railway Signal

Broadridge Financial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadridge Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Railway Signal

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days China Railway Signal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Broadridge Financial and China Railway

The main advantage of trading using opposite Broadridge Financial and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadridge Financial 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 Broadridge Financial Solutions and China Railway Signal 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.