Correlation Between China BlueChemical and Realty Income

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

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

Diversification Opportunities for China BlueChemical and Realty Income

-0.09

Correlation Coefficient

China BlueChemical  Realty Income

Good diversification

The 3 months correlation between China and Realty is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income and China BlueChemical 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 BlueChemical are associated (or correlated) with Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of China BlueChemical i.e., China BlueChemical and Realty Income go up and down completely randomly.

Pair Corralation between China BlueChemical and Realty Income

Assuming the 90 days horizon China BlueChemical is expected to generate 3.19 times more return on investment than Realty Income. However, China BlueChemical is 3.19 times more volatile than Realty Income. It trades about 0.03 of its potential returns per unit of risk. Realty Income is currently generating about 0.0 per unit of risk. If you would invest  22.00  in China BlueChemical on October 5, 2024 and sell it today you would earn a total of  4.00  from holding China BlueChemical or generate 18.18% return on investment over 90 days.

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

China BlueChemical  vs.  Realty Income

China BlueChemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China BlueChemical and Realty Income

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

The idea behind China BlueChemical and Realty Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.