Correlation Between CHINA EDUCATION and VONOVIA SE

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

By analyzing existing cross correlation between CHINA EDUCATION GROUP and VONOVIA SE ADR, you can compare the effects of market volatilities on CHINA EDUCATION and VONOVIA SE 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 EDUCATION with a short position of VONOVIA SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EDUCATION and VONOVIA SE.

Diversification Opportunities for CHINA EDUCATION and VONOVIA SE

0.54

Correlation Coefficient

CHINA EDUCATION  VONOVIA SE

Very weak diversification

The 3 months correlation between CHINA and VONOVIA is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and VONOVIA SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VONOVIA SE ADR and CHINA EDUCATION 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 EDUCATION GROUP are associated (or correlated) with VONOVIA SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VONOVIA SE ADR has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and VONOVIA SE go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and VONOVIA SE

Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to under-perform the VONOVIA SE. In addition to that, CHINA EDUCATION is 1.15 times more volatile than VONOVIA SE ADR. It trades about -0.33 of its total potential returns per unit of risk. VONOVIA SE ADR is currently generating about -0.15 per unit of volatility. If you would invest  1,500  in VONOVIA SE ADR on October 11, 2024 and sell it today you would lose (70.00) from holding VONOVIA SE ADR or give up 4.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

CHINA EDUCATION GROUP  vs.  VONOVIA SE ADR

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

VONOVIA SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VONOVIA SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CHINA EDUCATION and VONOVIA SE

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

The idea behind CHINA EDUCATION GROUP and VONOVIA SE ADR 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.