Correlation Between China Railway and Vinci S

Can any of the company-specific risk be diversified away by investing in both China Railway and Vinci S 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 Vinci S 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 Vinci S A, you can compare the effects of market volatilities on China Railway and Vinci S 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 Vinci S. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Vinci S.

Diversification Opportunities for China Railway and Vinci S

-0.22

Correlation Coefficient

China Railway  Vinci S

Very good diversification

The 3 months correlation between China and Vinci is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Vinci S A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vinci S A 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 Vinci S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vinci S A has no effect on the direction of China Railway i.e., China Railway and Vinci S go up and down completely randomly.

Pair Corralation between China Railway and Vinci S

Assuming the 90 days horizon China Railway Group is expected to generate 1.86 times more return on investment than Vinci S. However, China Railway is 1.86 times more volatile than Vinci S A. It trades about 0.05 of its potential returns per unit of risk. Vinci S A is currently generating about -0.07 per unit of risk. If you would invest  46.00  in China Railway Group on September 22, 2024 and sell it today you would earn a total of  1.00  from holding China Railway Group or generate 2.17% return on investment over 90 days.

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

China Railway Group  vs.  Vinci S A

China Railway Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Vinci S A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vinci S A 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 Vinci S

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

The idea behind China Railway Group and Vinci S A 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 Transaction History module to view history of all your transactions and understand their impact on performance.