Correlation Between Cinda Securities and China National

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

By analyzing existing cross correlation between Cinda Securities Co and China National Software, you can compare the effects of market volatilities on Cinda Securities and China National 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 Cinda Securities with a short position of China National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cinda Securities and China National.

Diversification Opportunities for Cinda Securities and China National

0.65

Correlation Coefficient

Cinda Securities  China National

Poor diversification

The 3 months correlation between Cinda and China is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cinda Securities Co and China National Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China National Software and Cinda Securities 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 Cinda Securities Co are associated (or correlated) with China National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China National Software has no effect on the direction of Cinda Securities i.e., Cinda Securities and China National go up and down completely randomly.

Pair Corralation between Cinda Securities and China National

Assuming the 90 days trading horizon Cinda Securities Co is expected to under-perform the China National. But the stock apears to be less risky and, when comparing its historical volatility, Cinda Securities Co is 1.6 times less risky than China National. The stock trades about -0.07 of its potential returns per unit of risk. The China National Software is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,128  in China National Software on October 25, 2024 and sell it today you would earn a total of  262.00  from holding China National Software or generate 6.35% return on investment over 90 days.

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

Cinda Securities Co  vs.  China National Software

Cinda Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cinda Securities Co 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.

China National Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China National Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cinda Securities and China National

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

The idea behind Cinda Securities Co and China National Software 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.