Correlation Between China State and Cinda Securities

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

Diversification Opportunities for China State and Cinda Securities

0.37

Correlation Coefficient

China State  Cinda Securities

Weak diversification

The 3 months correlation between China and Cinda is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Cinda Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinda Securities 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 Cinda Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinda Securities has no effect on the direction of China State i.e., China State and Cinda Securities go up and down completely randomly.

Pair Corralation between China State and Cinda Securities

Assuming the 90 days trading horizon China State Construction is expected to under-perform the Cinda Securities. But the stock apears to be less risky and, when comparing its historical volatility, China State Construction is 2.37 times less risky than Cinda Securities. The stock trades about -0.16 of its potential returns per unit of risk. The Cinda Securities Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,515  in Cinda Securities Co on December 4, 2024 and sell it today you would earn a total of  85.00  from holding Cinda Securities Co or generate 5.61% return on investment over 90 days.

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

China State Construction  vs.  Cinda Securities Co

China State Construction

Risk-Adjusted Performance

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.

Cinda Securities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cinda Securities Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cinda Securities may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China State and Cinda Securities

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

The idea behind China State Construction and Cinda Securities 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.