Correlation Between V V and China Railway

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

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

Diversification Opportunities for V V and China Railway

0.36

Correlation Coefficient

V V  China Railway

Weak diversification

The 3 months correlation between 600300 and China is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding V V Food and China Railway Tielong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Tielong and V V 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 V V Food 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 Tielong has no effect on the direction of V V i.e., V V and China Railway go up and down completely randomly.

Pair Corralation between V V and China Railway

Assuming the 90 days trading horizon V V Food is expected to under-perform the China Railway. But the stock apears to be less risky and, when comparing its historical volatility, V V Food is 1.03 times less risky than China Railway. The stock trades about 0.0 of its potential returns per unit of risk. The China Railway Tielong is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  550.00  in China Railway Tielong on October 26, 2024 and sell it today you would earn a total of  27.00  from holding China Railway Tielong or generate 4.91% return on investment over 90 days.

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

V V Food  vs.  China Railway Tielong

V V Food

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in V V Food are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, V V is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Railway Tielong

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Railway Tielong has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with V V and China Railway

The main advantage of trading using opposite V V and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V V 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 V V Food and China Railway Tielong 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.