Correlation Between China Life and Servyou Software

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

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

Diversification Opportunities for China Life and Servyou Software

-0.08

Correlation Coefficient

China Life  Servyou Software

Good diversification

The 3 months correlation between China and Servyou is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Servyou Software Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servyou Software and China Life 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 Life Insurance are associated (or correlated) with Servyou Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servyou Software has no effect on the direction of China Life i.e., China Life and Servyou Software go up and down completely randomly.

Pair Corralation between China Life and Servyou Software

Assuming the 90 days trading horizon China Life Insurance is expected to under-perform the Servyou Software. But the stock apears to be less risky and, when comparing its historical volatility, China Life Insurance is 2.23 times less risky than Servyou Software. The stock trades about -0.08 of its potential returns per unit of risk. The Servyou Software Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,145  in Servyou Software Group on December 1, 2024 and sell it today you would earn a total of  1,030  from holding Servyou Software Group or generate 32.75% return on investment over 90 days.

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

China Life Insurance  vs.  Servyou Software Group

China Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Life Insurance 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.

Servyou Software

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Servyou Software Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Servyou Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Life and Servyou Software

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

The idea behind China Life Insurance and Servyou Software Group 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..