Correlation Between New China and Shanghai CEO
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By analyzing existing cross correlation between New China Life and Shanghai CEO Environmental, you can compare the effects of market volatilities on New China and Shanghai CEO 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 New China with a short position of Shanghai CEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of New China and Shanghai CEO.
Diversification Opportunities for New China and Shanghai CEO
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Shanghai is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding New China Life and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ and New China 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 New China Life are associated (or correlated) with Shanghai CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of New China i.e., New China and Shanghai CEO go up and down completely randomly.
Pair Corralation between New China and Shanghai CEO
Assuming the 90 days trading horizon New China is expected to generate 6.1 times less return on investment than Shanghai CEO. In addition to that, New China is 1.33 times more volatile than Shanghai CEO Environmental. It trades about 0.01 of its total potential returns per unit of risk. Shanghai CEO Environmental is currently generating about 0.1 per unit of volatility. If you would invest 863.00 in Shanghai CEO Environmental on December 30, 2024 and sell it today you would earn a total of 91.00 from holding Shanghai CEO Environmental or generate 10.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
New China Life vs. Shanghai CEO Environmental
Performance |
Timeline |
New China Life |
Shanghai CEO Environ |
New China and Shanghai CEO Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with New China and Shanghai CEO
The main advantage of trading using opposite New China and Shanghai CEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New China position performs unexpectedly, Shanghai CEO 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 Shanghai CEO will offset losses from the drop in Shanghai CEO's long position.New China vs. Zijin Mining Group | New China vs. Tianjin Pengling Rubber | New China vs. Shandong Mining Machinery | New China vs. Shenyang Blue Silver |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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