Correlation Between Chongqing Road and China Railway

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

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

Diversification Opportunities for Chongqing Road and China Railway

0.0

Correlation Coefficient

Chongqing Road  China Railway

Pay attention - limited upside

The 3 months correlation between Chongqing and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Road Bridge and China Railway Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Materials and Chongqing Road 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 Chongqing Road Bridge 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 Materials has no effect on the direction of Chongqing Road i.e., Chongqing Road and China Railway go up and down completely randomly.

Pair Corralation between Chongqing Road and China Railway

If you would invest  0.00  in China Railway Materials on December 31, 2024 and sell it today you would earn a total of  0.00  from holding China Railway Materials or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.72%
Values	Daily Returns

Chongqing Road Bridge  vs.  China Railway Materials

Chongqing Road Bridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chongqing Road Bridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chongqing Road is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Railway Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Railway Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chongqing Road and China Railway

The main advantage of trading using opposite Chongqing Road and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Road 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 Chongqing Road Bridge and China Railway Materials 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..