Correlation Between China Tontine and Western Asset

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

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

Diversification Opportunities for China Tontine and Western Asset

0.0

Correlation Coefficient

China Tontine  Western Asset

Pay attention - limited upside

The 3 months correlation between China and Western is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Tontine Wines and Western Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Investment and China Tontine 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 Tontine Wines are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Investment has no effect on the direction of China Tontine i.e., China Tontine and Western Asset go up and down completely randomly.

Pair Corralation between China Tontine and Western Asset

If you would invest  1,599  in Western Asset Investment on December 27, 2024 and sell it today you would earn a total of  57.00  from holding Western Asset Investment or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

China Tontine Wines  vs.  Western Asset Investment

China Tontine Wines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Tontine Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Tontine is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Western Asset Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Western Asset is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with China Tontine and Western Asset

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

The idea behind China Tontine Wines and Western Asset Investment 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.