Correlation Between Cultural Investment and Sichuan Road

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

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

Diversification Opportunities for Cultural Investment and Sichuan Road

0.57

Correlation Coefficient

Cultural Investment  Sichuan Road

Very weak diversification

The 3 months correlation between Cultural and Sichuan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cultural Investment Holdings and Sichuan Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Road Bridge and Cultural Investment 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 Cultural Investment Holdings are associated (or correlated) with Sichuan Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Road Bridge has no effect on the direction of Cultural Investment i.e., Cultural Investment and Sichuan Road go up and down completely randomly.

Pair Corralation between Cultural Investment and Sichuan Road

Assuming the 90 days trading horizon Cultural Investment is expected to generate 1.25 times less return on investment than Sichuan Road. But when comparing it to its historical volatility, Cultural Investment Holdings is 1.17 times less risky than Sichuan Road. It trades about 0.15 of its potential returns per unit of risk. Sichuan Road Bridge is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  560.00  in Sichuan Road Bridge on September 14, 2024 and sell it today you would earn a total of  196.00  from holding Sichuan Road Bridge or generate 35.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Cultural Investment Holdings  vs.  Sichuan Road Bridge

Cultural Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cultural Investment Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cultural Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Sichuan Road Bridge

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Road Bridge are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Road sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cultural Investment and Sichuan Road

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

The idea behind Cultural Investment Holdings and Sichuan Road Bridge 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.