Correlation Between Ping An and China State

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Can any of the company-specific risk be diversified away by investing in both Ping An and China State 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 Ping An and China State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ping An Insurance and China State Construction, you can compare the effects of market volatilities on Ping An and China State 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 Ping An with a short position of China State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and China State.

Diversification Opportunities for Ping An and China State

PingChinaDiversified AwayPingChinaDiversified Away100%
0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Ping and China is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and China State Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China State Construction and Ping An 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 Ping An Insurance are associated (or correlated) with China State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China State Construction has no effect on the direction of Ping An i.e., Ping An and China State go up and down completely randomly.

Pair Corralation between Ping An and China State

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 1.01 times more return on investment than China State. However, Ping An is 1.01 times more volatile than China State Construction. It trades about 0.02 of its potential returns per unit of risk. China State Construction is currently generating about 0.0 per unit of risk. If you would invest  4,711  in Ping An Insurance on November 23, 2024 and sell it today you would earn a total of  367.00  from holding Ping An Insurance or generate 7.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Ping An Insurance  vs.  China State Construction

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15601318 601668
       Timeline  
Ping An Insurance 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ping An is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb48495051525354555657
China State Construction 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days China State Construction 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb5.45.55.65.75.85.966.16.26.3

Ping An and China State Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.29-1.76-1.23-0.7-0.170.310.841.371.92.43 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15601318 601668
       Returns  

Pair Trading with Ping An and China State

The main advantage of trading using opposite Ping An and China State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An position performs unexpectedly, China State 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 State will offset losses from the drop in China State's long position.
The idea behind Ping An Insurance and China State Construction 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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