Correlation Between China Overseas and EGRNF

Can any of the company-specific risk be diversified away by investing in both China Overseas and EGRNF 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 EGRNF 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 EGRNF, you can compare the effects of market volatilities on China Overseas and EGRNF 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 EGRNF. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Overseas and EGRNF.

Diversification Opportunities for China Overseas and EGRNF

-0.42

Correlation Coefficient

China Overseas  EGRNF

Very good diversification

The 3 months correlation between China and EGRNF is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding China Overseas Land and EGRNF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGRNF 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 EGRNF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGRNF has no effect on the direction of China Overseas i.e., China Overseas and EGRNF go up and down completely randomly.

Pair Corralation between China Overseas and EGRNF

Assuming the 90 days horizon China Overseas is expected to generate 39.24 times less return on investment than EGRNF. But when comparing it to its historical volatility, China Overseas Land is 40.79 times less risky than EGRNF. It trades about 0.12 of its potential returns per unit of risk. EGRNF is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.00  in EGRNF on December 28, 2024 and sell it today you would earn a total of  0.01  from holding EGRNF or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

China Overseas Land  vs.  EGRNF

China Overseas Land

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, China Overseas showed solid returns over the last few months and may actually be approaching a breakup point.

EGRNF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EGRNF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, EGRNF reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Overseas and EGRNF

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

The idea behind China Overseas Land and EGRNF 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.