Correlation Between Fifth Third and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both Fifth Third and CHINA HUARONG 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 Fifth Third and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on Fifth Third and CHINA HUARONG 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 Fifth Third with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and CHINA HUARONG.
Diversification Opportunities for Fifth Third and CHINA HUARONG
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Fifth and CHINA is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of Fifth Third i.e., Fifth Third and CHINA HUARONG go up and down completely randomly.
Pair Corralation between Fifth Third and CHINA HUARONG
Assuming the 90 days horizon Fifth Third Bancorp is expected to under-perform the CHINA HUARONG. But the stock apears to be less risky and, when comparing its historical volatility, Fifth Third Bancorp is 16.42 times less risky than CHINA HUARONG. The stock trades about -0.1 of its potential returns per unit of risk. The CHINA HUARONG ENERHD 50 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.15 in CHINA HUARONG ENERHD 50 on December 3, 2024 and sell it today you would lose (0.05) from holding CHINA HUARONG ENERHD 50 or give up 33.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Fifth Third Bancorp vs. CHINA HUARONG ENERHD 50
Performance |
Timeline |
Fifth Third Bancorp |
CHINA HUARONG ENERHD |
Fifth Third and CHINA HUARONG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fifth Third and CHINA HUARONG
The main advantage of trading using opposite Fifth Third and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third position performs unexpectedly, CHINA HUARONG 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 HUARONG will offset losses from the drop in CHINA HUARONG's long position.Fifth Third vs. EBRO FOODS | Fifth Third vs. Eidesvik Offshore ASA | Fifth Third vs. Nomad Foods | Fifth Third vs. Collins Foods Limited |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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