Correlation Between China Datang and AXA SA

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

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

Diversification Opportunities for China Datang and AXA SA

-0.25

Correlation Coefficient

China Datang  AXA SA

Very good diversification

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

Pair Corralation between China Datang and AXA SA

Assuming the 90 days horizon China Datang is expected to generate 1.03 times less return on investment than AXA SA. In addition to that, China Datang is 1.67 times more volatile than AXA SA. It trades about 0.06 of its total potential returns per unit of risk. AXA SA is currently generating about 0.1 per unit of volatility. If you would invest  3,396  in AXA SA on October 25, 2024 and sell it today you would earn a total of  176.00  from holding AXA SA or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Datang  vs.  AXA SA

China Datang

Risk-Adjusted Performance

3 of 100

Insignificant

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

AXA SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AXA SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AXA SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Datang and AXA SA

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

The idea behind China Datang and AXA SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.