Correlation Between China Tontine and AETNA

Can any of the company-specific risk be diversified away by investing in both China Tontine and AETNA 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 AETNA 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 AETNA INC 7625, you can compare the effects of market volatilities on China Tontine and AETNA 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 AETNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Tontine and AETNA.

Diversification Opportunities for China Tontine and AETNA

0.0

Correlation Coefficient

China Tontine  AETNA

Pay attention - limited upside

The 3 months correlation between China and AETNA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Tontine Wines and AETNA INC 7625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AETNA INC 7625 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 AETNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AETNA INC 7625 has no effect on the direction of China Tontine i.e., China Tontine and AETNA go up and down completely randomly.

Pair Corralation between China Tontine and AETNA

Assuming the 90 days horizon China Tontine Wines is expected to generate 54.46 times more return on investment than AETNA. However, China Tontine is 54.46 times more volatile than AETNA INC 7625. It trades about 0.09 of its potential returns per unit of risk. AETNA INC 7625 is currently generating about 0.01 per unit of risk. If you would invest  1.50  in China Tontine Wines on September 16, 2024 and sell it today you would earn a total of  5.60  from holding China Tontine Wines or generate 373.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	59.43%
Values	Daily Returns

China Tontine Wines  vs.  AETNA INC 7625

China Tontine Wines

Risk-Adjusted Performance

0 of 100

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

AETNA INC 7625

Risk-Adjusted Performance

7 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AETNA INC 7625 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AETNA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Tontine and AETNA

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

The idea behind China Tontine Wines and AETNA INC 7625 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.