Correlation Between China Railway and InMode

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

Diversification Opportunities for China Railway and InMode

-0.03

Correlation Coefficient

China Railway  InMode

Good diversification

The 3 months correlation between China and InMode is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and InMode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InMode 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 InMode. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InMode has no effect on the direction of China Railway i.e., China Railway and InMode go up and down completely randomly.

Pair Corralation between China Railway and InMode

Assuming the 90 days horizon China Railway is expected to generate 1.12 times less return on investment than InMode. In addition to that, China Railway is 2.19 times more volatile than InMode. It trades about 0.13 of its total potential returns per unit of risk. InMode is currently generating about 0.33 per unit of volatility. If you would invest  1,667  in InMode on December 4, 2024 and sell it today you would earn a total of  222.00  from holding InMode or generate 13.32% 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.  InMode

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.

InMode

Risk-Adjusted Performance

Very Weak

Over the last 90 days InMode has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, InMode is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with China Railway and InMode

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

The idea behind China Railway Group and InMode 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.