Correlation Between China Fund and Ecofin Sustainable

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

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

Diversification Opportunities for China Fund and Ecofin Sustainable

0.68

Correlation Coefficient

China Fund  Ecofin Sustainable

Poor diversification

The 3 months correlation between China and Ecofin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Fund and Ecofin Sustainable And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofin Sustainable And and China Fund 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 Fund are associated (or correlated) with Ecofin Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofin Sustainable And has no effect on the direction of China Fund i.e., China Fund and Ecofin Sustainable go up and down completely randomly.

Pair Corralation between China Fund and Ecofin Sustainable

Considering the 90-day investment horizon China Fund is expected to under-perform the Ecofin Sustainable. In addition to that, China Fund is 4.97 times more volatile than Ecofin Sustainable And. It trades about -0.11 of its total potential returns per unit of risk. Ecofin Sustainable And is currently generating about 0.03 per unit of volatility. If you would invest  1,263  in Ecofin Sustainable And on September 3, 2024 and sell it today you would earn a total of  3.00  from holding Ecofin Sustainable And or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

China Fund  vs.  Ecofin Sustainable And

China Fund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical indicators, China Fund displayed solid returns over the last few months and may actually be approaching a breakup point.

Ecofin Sustainable And

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofin Sustainable And are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Ecofin Sustainable is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Fund and Ecofin Sustainable

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

The idea behind China Fund and Ecofin Sustainable And 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.