Correlation Between CHINA TONTINE and China Water

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

By analyzing existing cross correlation between CHINA TONTINE WINES and China Water Affairs, you can compare the effects of market volatilities on CHINA TONTINE and China Water 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 TONTINE with a short position of China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TONTINE and China Water.

Diversification Opportunities for CHINA TONTINE and China Water

0.0

Correlation Coefficient

CHINA TONTINE  China Water

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 TONTINE WINES and China Water Affairs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Affairs and CHINA TONTINE 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 TONTINE WINES are associated (or correlated) with China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Affairs has no effect on the direction of CHINA TONTINE i.e., CHINA TONTINE and China Water go up and down completely randomly.

Pair Corralation between CHINA TONTINE and China Water

If you would invest  59.00  in China Water Affairs on October 8, 2024 and sell it today you would earn a total of  1.00  from holding China Water Affairs or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

CHINA TONTINE WINES  vs.  China Water Affairs

CHINA TONTINE WINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA TONTINE WINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, CHINA TONTINE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

China Water Affairs

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Water Affairs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, China Water is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA TONTINE and China Water

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

The idea behind CHINA TONTINE WINES and China Water Affairs 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.