Correlation Between China Overseas and Sino Land

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

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

Diversification Opportunities for China Overseas and Sino Land

0.26

Correlation Coefficient

China Overseas  Sino Land

Modest diversification

The 3 months correlation between China and Sino is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Overseas Land and Sino Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Land and China Overseas 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 Overseas Land are associated (or correlated) with Sino Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Land has no effect on the direction of China Overseas i.e., China Overseas and Sino Land go up and down completely randomly.

Pair Corralation between China Overseas and Sino Land

Assuming the 90 days horizon China Overseas Land is expected to under-perform the Sino Land. In addition to that, China Overseas is 1.53 times more volatile than Sino Land Co. It trades about -0.27 of its total potential returns per unit of risk. Sino Land Co is currently generating about 0.17 per unit of volatility. If you would invest  508.00  in Sino Land Co on September 13, 2024 and sell it today you would earn a total of  37.00  from holding Sino Land Co or generate 7.28% return on investment over 90 days.

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

China Overseas Land  vs.  Sino Land Co

China Overseas Land

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, China Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

Sino Land

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Land Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sino Land showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Overseas and Sino Land

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

The idea behind China Overseas Land and Sino Land 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..