Correlation Between China De and CLST Holdings

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

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

Diversification Opportunities for China De and CLST Holdings

0.4

Correlation Coefficient

China De  CLST Holdings

Very weak diversification

The 3 months correlation between China and CLST is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding China De Xiao and CLST Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLST Holdings and China De 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 De Xiao are associated (or correlated) with CLST Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLST Holdings has no effect on the direction of China De i.e., China De and CLST Holdings go up and down completely randomly.

Pair Corralation between China De and CLST Holdings

Given the investment horizon of 90 days China De is expected to generate 14.52 times less return on investment than CLST Holdings. But when comparing it to its historical volatility, China De Xiao is 2.72 times less risky than CLST Holdings. It trades about 0.02 of its potential returns per unit of risk. CLST Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.90  in CLST Holdings on October 10, 2024 and sell it today you would earn a total of  3.90  from holding CLST Holdings or generate 433.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.41%
Values	Daily Returns

China De Xiao  vs.  CLST Holdings

China De Xiao

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China De Xiao has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

CLST Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CLST Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, CLST Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China De and CLST Holdings

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

The idea behind China De Xiao and CLST Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.