Correlation Between China Water and York Water

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

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

Diversification Opportunities for China Water and York Water

0.0

Correlation Coefficient

China Water  York Water

Pay attention - limited upside

The 3 months correlation between China and York is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Water Affairs and The York Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on York Water and China Water 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 Water Affairs are associated (or correlated) with York Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of York Water has no effect on the direction of China Water i.e., China Water and York Water go up and down completely randomly.

Pair Corralation between China Water and York Water

Assuming the 90 days horizon China Water Affairs is expected to generate 3.18 times more return on investment than York Water. However, China Water is 3.18 times more volatile than The York Water. It trades about 0.02 of its potential returns per unit of risk. The York Water is currently generating about -0.04 per unit of risk. If you would invest  75.00  in China Water Affairs on October 21, 2024 and sell it today you would lose (4.00) from holding China Water Affairs or give up 5.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	52.99%
Values	Daily Returns

China Water Affairs  vs.  The York Water

China Water Affairs

Risk-Adjusted Performance

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Very Weak

Over the last 90 days China Water Affairs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, China Water is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

York Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The York Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with China Water and York Water

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

The idea behind China Water Affairs and The York Water 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.