Correlation Between China Sports and Chengdu Xingrong

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

By analyzing existing cross correlation between China Sports Industry and Chengdu Xingrong Investment, you can compare the effects of market volatilities on China Sports and Chengdu Xingrong 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 China Sports with a short position of Chengdu Xingrong. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Sports and Chengdu Xingrong.

Diversification Opportunities for China Sports and Chengdu Xingrong

0.56

Correlation Coefficient

China Sports  Chengdu Xingrong

Very weak diversification

The 3 months correlation between China and Chengdu is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Sports Industry and Chengdu Xingrong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Xingrong Inv and China Sports 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 China Sports Industry are associated (or correlated) with Chengdu Xingrong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Xingrong Inv has no effect on the direction of China Sports i.e., China Sports and Chengdu Xingrong go up and down completely randomly.

Pair Corralation between China Sports and Chengdu Xingrong

Assuming the 90 days trading horizon China Sports Industry is expected to generate 3.08 times more return on investment than Chengdu Xingrong. However, China Sports is 3.08 times more volatile than Chengdu Xingrong Investment. It trades about 0.11 of its potential returns per unit of risk. Chengdu Xingrong Investment is currently generating about 0.14 per unit of risk. If you would invest  805.00  in China Sports Industry on September 24, 2024 and sell it today you would earn a total of  55.00  from holding China Sports Industry or generate 6.83% return on investment over 90 days.

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

China Sports Industry  vs.  Chengdu Xingrong Investment

China Sports Industry

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Sports Industry are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Chengdu Xingrong Inv

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Xingrong Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Xingrong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Sports and Chengdu Xingrong

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

The idea behind China Sports Industry and Chengdu Xingrong Investment 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.