Correlation Between Ruentex Development and China Development

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

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

Diversification Opportunities for Ruentex Development and China Development

-0.08

Correlation Coefficient

Ruentex Development  China Development

Good diversification

The 3 months correlation between Ruentex and China is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of Ruentex Development i.e., Ruentex Development and China Development go up and down completely randomly.

Pair Corralation between Ruentex Development and China Development

Assuming the 90 days trading horizon Ruentex Development is expected to generate 21.96 times less return on investment than China Development. In addition to that, Ruentex Development is 1.35 times more volatile than China Development Financial. It trades about 0.0 of its total potential returns per unit of risk. China Development Financial is currently generating about 0.05 per unit of volatility. If you would invest  1,320  in China Development Financial on October 21, 2024 and sell it today you would earn a total of  385.00  from holding China Development Financial or generate 29.17% return on investment over 90 days.

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

Ruentex Development Co  vs.  China Development Financial

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

China Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Development Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ruentex Development and China Development

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

The idea behind Ruentex Development Co and China Development Financial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.