Correlation Between China State and Hunan Investment

Can any of the company-specific risk be diversified away by investing in both China State and Hunan 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 State and Hunan Investment 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 Hunan Investment Group, you can compare the effects of market volatilities on China State and Hunan 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 State with a short position of Hunan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Hunan Investment.

Diversification Opportunities for China State and Hunan Investment

0.0

Correlation Coefficient

China State  Hunan Investment

Pay attention - limited upside

The 3 months correlation between China and Hunan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment 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 Hunan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Investment has no effect on the direction of China State i.e., China State and Hunan Investment go up and down completely randomly.

Pair Corralation between China State and Hunan Investment

Assuming the 90 days trading horizon China State Construction is expected to generate 0.46 times more return on investment than Hunan Investment. However, China State Construction is 2.19 times less risky than Hunan Investment. It trades about -0.34 of its potential returns per unit of risk. Hunan Investment Group is currently generating about -0.45 per unit of risk. If you would invest  591.00  in China State Construction on October 16, 2024 and sell it today you would lose (42.00) from holding China State Construction or give up 7.11% of portfolio value over 90 days.

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

China State Construction  vs.  Hunan Investment Group

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 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.

Hunan Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hunan 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 State and Hunan Investment

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

The idea behind China State Construction and Hunan Investment 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.

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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 Stocks Directory module to find actively traded stocks across global markets.