Correlation Between China Pacific and AUPU Home

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

By analyzing existing cross correlation between China Pacific Insurance and AUPU Home Style, you can compare the effects of market volatilities on China Pacific and AUPU Home 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 Pacific with a short position of AUPU Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Pacific and AUPU Home.

Diversification Opportunities for China Pacific and AUPU Home

-0.43

Correlation Coefficient

China Pacific  AUPU Home

Very good diversification

The 3 months correlation between China and AUPU is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Pacific Insurance and AUPU Home Style in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUPU Home Style and China Pacific 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 Pacific Insurance are associated (or correlated) with AUPU Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUPU Home Style has no effect on the direction of China Pacific i.e., China Pacific and AUPU Home go up and down completely randomly.

Pair Corralation between China Pacific and AUPU Home

Assuming the 90 days trading horizon China Pacific Insurance is expected to generate 0.99 times more return on investment than AUPU Home. However, China Pacific Insurance is 1.01 times less risky than AUPU Home. It trades about 0.03 of its potential returns per unit of risk. AUPU Home Style is currently generating about 0.02 per unit of risk. If you would invest  2,530  in China Pacific Insurance on October 11, 2024 and sell it today you would earn a total of  669.00  from holding China Pacific Insurance or generate 26.44% return on investment over 90 days.

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

China Pacific Insurance  vs.  AUPU Home Style

China Pacific Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Pacific Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

AUPU Home Style

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AUPU Home Style are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AUPU Home may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Pacific and AUPU Home

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

The idea behind China Pacific Insurance and AUPU Home Style 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.