Correlation Between CHIK and WisdomTree China

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

By analyzing existing cross correlation between CHIK and WisdomTree China ex State Owned, you can compare the effects of market volatilities on CHIK and WisdomTree China 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 CHIK with a short position of WisdomTree China. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHIK and WisdomTree China.

Diversification Opportunities for CHIK and WisdomTree China

-0.47

Correlation Coefficient

CHIK  WisdomTree China

Very good diversification

The 3 months correlation between CHIK and WisdomTree is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CHIK and WisdomTree China ex State Owne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree China and CHIK 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 CHIK are associated (or correlated) with WisdomTree China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree China has no effect on the direction of CHIK i.e., CHIK and WisdomTree China go up and down completely randomly.

Pair Corralation between CHIK and WisdomTree China

If you would invest  3,085  in WisdomTree China ex State Owned on September 19, 2024 and sell it today you would lose (16.00) from holding WisdomTree China ex State Owned or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

CHIK  vs.  WisdomTree China ex State Owne

CHIK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, CHIK is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

WisdomTree China

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree China ex State Owned are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, WisdomTree China exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHIK and WisdomTree China

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

The idea behind CHIK and WisdomTree China ex State Owned 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..