Correlation Between China Railway and Nuode Investment

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

Diversification Opportunities for China Railway and Nuode Investment

0.27

Correlation Coefficient

China Railway  Nuode Investment

Modest diversification

The 3 months correlation between China and Nuode is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Nuode Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuode Investment 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 Nuode Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuode Investment has no effect on the direction of China Railway i.e., China Railway and Nuode Investment go up and down completely randomly.

Pair Corralation between China Railway and Nuode Investment

Assuming the 90 days trading horizon China Railway Group is expected to generate 0.63 times more return on investment than Nuode Investment. However, China Railway Group is 1.59 times less risky than Nuode Investment. It trades about 0.02 of its potential returns per unit of risk. Nuode Investment Co is currently generating about -0.02 per unit of risk. If you would invest  578.00  in China Railway Group on October 9, 2024 and sell it today you would earn a total of  25.00  from holding China Railway Group or generate 4.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.58%
Values	Daily Returns

China Railway Group  vs.  Nuode Investment Co

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 somewhat strong basic indicators, China Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nuode Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuode Investment Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nuode Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Railway and Nuode Investment

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

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