Correlation Between Panda Financial and China World

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

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

Diversification Opportunities for Panda Financial and China World

-0.32

Correlation Coefficient

Panda Financial  China World

Very good diversification

The 3 months correlation between Panda and China is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Panda Financial Holding and China World Trade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China World Trade and Panda 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 Panda Financial Holding are associated (or correlated) with China World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China World Trade has no effect on the direction of Panda Financial i.e., Panda Financial and China World go up and down completely randomly.

Pair Corralation between Panda Financial and China World

Assuming the 90 days trading horizon Panda Financial Holding is expected to generate 1.38 times more return on investment than China World. However, Panda Financial is 1.38 times more volatile than China World Trade. It trades about 0.18 of its potential returns per unit of risk. China World Trade is currently generating about 0.01 per unit of risk. If you would invest  1,116  in Panda Financial Holding on September 14, 2024 and sell it today you would earn a total of  375.00  from holding Panda Financial Holding or generate 33.6% return on investment over 90 days.

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

Panda Financial Holding  vs.  China World Trade

Panda Financial Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Panda Financial Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Panda Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

China World Trade

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Panda Financial and China World

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

The idea behind Panda Financial Holding and China World Trade 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.