Correlation Between China Times and PlayNitride

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

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

Diversification Opportunities for China Times and PlayNitride

0.37

Correlation Coefficient

China Times  PlayNitride

Weak diversification

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

Pair Corralation between China Times and PlayNitride

Assuming the 90 days trading horizon China Times Publishing is expected to under-perform the PlayNitride. But the stock apears to be less risky and, when comparing its historical volatility, China Times Publishing is 1.41 times less risky than PlayNitride. The stock trades about -0.03 of its potential returns per unit of risk. The PlayNitride is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  15,750  in PlayNitride on October 9, 2024 and sell it today you would earn a total of  5,450  from holding PlayNitride or generate 34.6% return on investment over 90 days.

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

China Times Publishing  vs.  PlayNitride

China Times Publishing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Times Publishing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Times showed solid returns over the last few months and may actually be approaching a breakup point.

PlayNitride

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PlayNitride are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PlayNitride showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Times and PlayNitride

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

The idea behind China Times Publishing and PlayNitride 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.