Correlation Between China Railway and Arcadis NV

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

Diversification Opportunities for China Railway and Arcadis NV

-0.46

Correlation Coefficient

China Railway  Arcadis NV

Very good diversification

The 3 months correlation between China and Arcadis is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Arcadis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadis NV 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 Arcadis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadis NV has no effect on the direction of China Railway i.e., China Railway and Arcadis NV go up and down completely randomly.

Pair Corralation between China Railway and Arcadis NV

Assuming the 90 days horizon China Railway Group is expected to generate 2.05 times more return on investment than Arcadis NV. However, China Railway is 2.05 times more volatile than Arcadis NV. It trades about 0.05 of its potential returns per unit of risk. Arcadis NV is currently generating about -0.18 per unit of risk. If you would invest  50.00  in China Railway Group on December 29, 2024 and sell it today you would earn a total of  3.00  from holding China Railway Group or generate 6.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

China Railway Group  vs.  Arcadis NV

China Railway Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Arcadis NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arcadis NV 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with China Railway and Arcadis NV

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

The idea behind China Railway Group and Arcadis NV 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.