Correlation Between China Railway and Lander Sports

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

By analyzing existing cross correlation between China Railway Group and Lander Sports Development, you can compare the effects of market volatilities on China Railway and Lander Sports 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 China Railway with a short position of Lander Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Lander Sports.

Diversification Opportunities for China Railway and Lander Sports

-0.22

Correlation Coefficient

China Railway  Lander Sports

Very good diversification

The 3 months correlation between China and Lander is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Lander Sports Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lander Sports Development and China Railway 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 China Railway Group are associated (or correlated) with Lander Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lander Sports Development has no effect on the direction of China Railway i.e., China Railway and Lander Sports go up and down completely randomly.

Pair Corralation between China Railway and Lander Sports

Assuming the 90 days trading horizon China Railway Group is expected to under-perform the Lander Sports. But the stock apears to be less risky and, when comparing its historical volatility, China Railway Group is 5.02 times less risky than Lander Sports. The stock trades about -0.31 of its potential returns per unit of risk. The Lander Sports Development is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  333.00  in Lander Sports Development on October 8, 2024 and sell it today you would lose (13.00) from holding Lander Sports Development or give up 3.9% of portfolio value over 90 days.

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

China Railway Group  vs.  Lander Sports Development

China Railway Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Railway Group 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.

Lander Sports Development

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lander Sports Development are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lander Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Railway and Lander Sports

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

The idea behind China Railway Group and Lander Sports Development 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.