Correlation Between China Power and China Medicine
Can any of the company-specific risk be diversified away by investing in both China Power and China Medicine 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 Power and China Medicine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Power Equipment and China Medicine, you can compare the effects of market volatilities on China Power and China Medicine 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 Power with a short position of China Medicine. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Power and China Medicine.
Diversification Opportunities for China Power and China Medicine
0.0 | Correlation Coefficient |
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 Power Equipment and China Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Medicine and China Power 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 Power Equipment are associated (or correlated) with China Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Medicine has no effect on the direction of China Power i.e., China Power and China Medicine go up and down completely randomly.
Pair Corralation between China Power and China Medicine
If you would invest 0.01 in China Medicine on October 10, 2024 and sell it today you would earn a total of 0.99 from holding China Medicine or generate 9900.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 96.83% |
Values | Daily Returns |
China Power Equipment vs. China Medicine
Performance |
Timeline |
China Power Equipment |
China Medicine |
China Power and China Medicine Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Power and China Medicine
The main advantage of trading using opposite China Power and China Medicine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Power position performs unexpectedly, China Medicine 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 Medicine will offset losses from the drop in China Medicine's long position.China Power vs. Primo Brands | China Power vs. Nascent Wine | China Power vs. Pinterest | China Power vs. Vodka Brands Corp |
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Check out your portfolio center.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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