Correlation Between China Liberal and Reitmans

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

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

Diversification Opportunities for China Liberal and Reitmans

-0.7

Correlation Coefficient

China Liberal  Reitmans

Excellent diversification

The 3 months correlation between China and Reitmans is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Liberal Education and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans Limited and China Liberal 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 Liberal Education are associated (or correlated) with Reitmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans Limited has no effect on the direction of China Liberal i.e., China Liberal and Reitmans go up and down completely randomly.

Pair Corralation between China Liberal and Reitmans

Given the investment horizon of 90 days China Liberal Education is expected to generate 34.61 times more return on investment than Reitmans. However, China Liberal is 34.61 times more volatile than Reitmans Limited. It trades about 0.06 of its potential returns per unit of risk. Reitmans Limited is currently generating about -0.02 per unit of risk. If you would invest  231.00  in China Liberal Education on September 28, 2024 and sell it today you would earn a total of  129.00  from holding China Liberal Education or generate 55.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

China Liberal Education  vs.  Reitmans Limited

China Liberal Education

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Liberal Education are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, China Liberal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Reitmans Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reitmans Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with China Liberal and Reitmans

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

The idea behind China Liberal Education and Reitmans Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.