Correlation Between China Railway and Mango Excellent

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

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

Diversification Opportunities for China Railway and Mango Excellent

0.94

Correlation Coefficient

China Railway  Mango Excellent

Almost no diversification

The 3 months correlation between China and Mango is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and Mango Excellent Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mango Excellent Media and China Railway 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 Railway Construction are associated (or correlated) with Mango Excellent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mango Excellent Media has no effect on the direction of China Railway i.e., China Railway and Mango Excellent go up and down completely randomly.

Pair Corralation between China Railway and Mango Excellent

Assuming the 90 days trading horizon China Railway is expected to generate 1.62 times less return on investment than Mango Excellent. But when comparing it to its historical volatility, China Railway Construction is 1.49 times less risky than Mango Excellent. It trades about 0.12 of its potential returns per unit of risk. Mango Excellent Media is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,934  in Mango Excellent Media on September 21, 2024 and sell it today you would earn a total of  1,015  from holding Mango Excellent Media or generate 52.48% return on investment over 90 days.

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

China Railway Construction  vs.  Mango Excellent Media

China Railway Constr

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Railway sustained solid returns over the last few months and may actually be approaching a breakup point.

Mango Excellent Media

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mango Excellent Media are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mango Excellent sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Railway and Mango Excellent

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

The idea behind China Railway Construction and Mango Excellent Media 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.