Correlation Between China Railway and Identiv

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

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

Diversification Opportunities for China Railway and Identiv

0.0

Correlation Coefficient

China Railway  Identiv

Pay attention - limited upside

The 3 months correlation between China and Identiv is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Identiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Identiv and China Railway 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 Railway Group are associated (or correlated) with Identiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Identiv has no effect on the direction of China Railway i.e., China Railway and Identiv go up and down completely randomly.

Pair Corralation between China Railway and Identiv

Assuming the 90 days horizon China Railway Group is expected to generate 0.53 times more return on investment than Identiv. However, China Railway Group is 1.89 times less risky than Identiv. It trades about -0.04 of its potential returns per unit of risk. Identiv is currently generating about -0.05 per unit of risk. If you would invest  48.00  in China Railway Group on December 27, 2024 and sell it today you would lose (3.00) from holding China Railway Group or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Railway Group  vs.  Identiv

China Railway Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Railway Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Identiv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Identiv has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China Railway and Identiv

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

The idea behind China Railway Group and Identiv 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.