Correlation Between Country Garden and China Overseas

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

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

Diversification Opportunities for Country Garden and China Overseas

-0.25

Correlation Coefficient

Country Garden  China Overseas

Very good diversification

The 3 months correlation between Country and China is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Country Garden Holdings and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and Country Garden 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 Country Garden Holdings are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Country Garden i.e., Country Garden and China Overseas go up and down completely randomly.

Pair Corralation between Country Garden and China Overseas

Assuming the 90 days horizon Country Garden Holdings is expected to generate 9.75 times more return on investment than China Overseas. However, Country Garden is 9.75 times more volatile than China Overseas Land. It trades about 0.1 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.0 per unit of risk. If you would invest  17.00  in Country Garden Holdings on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Country Garden Holdings or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.72%
Values	Daily Returns

Country Garden Holdings  vs.  China Overseas Land

Country Garden Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Country Garden Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Country Garden reported solid returns over the last few months and may actually be approaching a breakup point.

China Overseas Land

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, China Overseas showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Country Garden and China Overseas

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

The idea behind Country Garden Holdings and China Overseas Land 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.