Correlation Between China State and Bohai Leasing

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

By analyzing existing cross correlation between China State Construction and Bohai Leasing Co, you can compare the effects of market volatilities on China State and Bohai Leasing 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 State with a short position of Bohai Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Bohai Leasing.

Diversification Opportunities for China State and Bohai Leasing

-0.07

Correlation Coefficient

China State  Bohai Leasing

Good diversification

The 3 months correlation between China and Bohai is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Bohai Leasing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bohai Leasing and China State 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 State Construction are associated (or correlated) with Bohai Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bohai Leasing has no effect on the direction of China State i.e., China State and Bohai Leasing go up and down completely randomly.

Pair Corralation between China State and Bohai Leasing

Assuming the 90 days trading horizon China State Construction is expected to generate 0.54 times more return on investment than Bohai Leasing. However, China State Construction is 1.86 times less risky than Bohai Leasing. It trades about -0.16 of its potential returns per unit of risk. Bohai Leasing Co is currently generating about -0.33 per unit of risk. If you would invest  606.00  in China State Construction on October 5, 2024 and sell it today you would lose (24.00) from holding China State Construction or give up 3.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

China State Construction  vs.  Bohai Leasing Co

China State Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China State Construction 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.

Bohai Leasing

Risk-Adjusted Performance

4 of 100

Modest

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

Pair Trading with China State and Bohai Leasing

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

The idea behind China State Construction and Bohai Leasing 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.