Correlation Between China Overseas and China Reinsurance

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

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

Diversification Opportunities for China Overseas and China Reinsurance

0.0

Correlation Coefficient

China Overseas  China Reinsurance

Pay attention - limited upside

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

Pair Corralation between China Overseas and China Reinsurance

If you would invest (100.00) in China Reinsurance Corp on October 7, 2024 and sell it today you would earn a total of  100.00  from holding China Reinsurance Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

China Overseas Land  vs.  China Reinsurance Corp

China Overseas Land

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Reinsurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Reinsurance Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with China Overseas and China Reinsurance

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

The idea behind China Overseas Land and China Reinsurance Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.