Correlation Between China Galaxy and Computershare

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

By analyzing existing cross correlation between China Galaxy Securities and Computershare Ltd ADR, you can compare the effects of market volatilities on China Galaxy and Computershare 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 Galaxy with a short position of Computershare. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Galaxy and Computershare.

Diversification Opportunities for China Galaxy and Computershare

0.61

Correlation Coefficient

China Galaxy  Computershare

Poor diversification

The 3 months correlation between China and Computershare is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding China Galaxy Securities and Computershare Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare ADR and China Galaxy 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 Galaxy Securities are associated (or correlated) with Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare ADR has no effect on the direction of China Galaxy i.e., China Galaxy and Computershare go up and down completely randomly.

Pair Corralation between China Galaxy and Computershare

If you would invest  2,138  in Computershare Ltd ADR on October 11, 2024 and sell it today you would earn a total of  20.00  from holding Computershare Ltd ADR or generate 0.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

China Galaxy Securities  vs.  Computershare Ltd ADR

China Galaxy Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Galaxy Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, China Galaxy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Computershare ADR

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Ltd ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Computershare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Galaxy and Computershare

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

The idea behind China Galaxy Securities and Computershare Ltd ADR 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.