Correlation Between Chongqing Road and China Sports

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

Diversification Opportunities for Chongqing Road and China Sports

0.59

Correlation Coefficient

Chongqing Road  China Sports

Very weak diversification

The 3 months correlation between Chongqing and China is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Road Bridge and China Sports Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Sports Industry 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 Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Sports Industry has no effect on the direction of Chongqing Road i.e., Chongqing Road and China Sports go up and down completely randomly.

Pair Corralation between Chongqing Road and China Sports

Assuming the 90 days trading horizon Chongqing Road Bridge is expected to under-perform the China Sports. In addition to that, Chongqing Road is 1.37 times more volatile than China Sports Industry. It trades about -0.06 of its total potential returns per unit of risk. China Sports Industry is currently generating about 0.01 per unit of volatility. If you would invest  773.00  in China Sports Industry on October 22, 2024 and sell it today you would earn a total of  1.00  from holding China Sports Industry or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Chongqing Road Bridge  vs.  China Sports Industry

Chongqing Road Bridge

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Sports Industry

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Sports Industry are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Sports 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 Sports

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

The idea behind Chongqing Road Bridge and China Sports Industry 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 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..