Correlation Between China Railway and Integrated Electronic

Can any of the company-specific risk be diversified away by investing in both China Railway and Integrated Electronic 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 Integrated Electronic 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 Integrated Electronic Systems, you can compare the effects of market volatilities on China Railway and Integrated Electronic 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 Integrated Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Integrated Electronic.

Diversification Opportunities for China Railway and Integrated Electronic

0.21

Correlation Coefficient

China Railway  Integrated Electronic

Modest diversification

The 3 months correlation between China and Integrated is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Integrated Electronic Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Electronic 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 Integrated Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Electronic has no effect on the direction of China Railway i.e., China Railway and Integrated Electronic go up and down completely randomly.

Pair Corralation between China Railway and Integrated Electronic

Assuming the 90 days trading horizon China Railway Group is expected to generate 0.68 times more return on investment than Integrated Electronic. However, China Railway Group is 1.48 times less risky than Integrated Electronic. It trades about 0.01 of its potential returns per unit of risk. Integrated Electronic Systems is currently generating about 0.01 per unit of risk. If you would invest  564.00  in China Railway Group on October 24, 2024 and sell it today you would earn a total of  24.00  from holding China Railway Group or generate 4.26% return on investment over 90 days.

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

China Railway Group  vs.  Integrated Electronic Systems

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.

Integrated Electronic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Integrated Electronic Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Integrated Electronic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Railway and Integrated Electronic

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

The idea behind China Railway Group and Integrated Electronic Systems 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.