Correlation Between Identiv and China Communications

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

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

Diversification Opportunities for Identiv and China Communications

0.47

Correlation Coefficient

Identiv  China Communications

Very weak diversification

The 3 months correlation between Identiv and China is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Identiv and China Communications Construct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and Identiv 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 Identiv are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Identiv i.e., Identiv and China Communications go up and down completely randomly.

Pair Corralation between Identiv and China Communications

Assuming the 90 days trading horizon Identiv is expected to under-perform the China Communications. In addition to that, Identiv is 2.46 times more volatile than China Communications Construction. It trades about -0.04 of its total potential returns per unit of risk. China Communications Construction is currently generating about -0.09 per unit of volatility. If you would invest  67.00  in China Communications Construction on December 29, 2024 and sell it today you would lose (6.00) from holding China Communications Construction or give up 8.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Identiv  vs.  China Communications Construct

Identiv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Identiv 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.

China Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Communications Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 Identiv and China Communications

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

The idea behind Identiv and China Communications Construction 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.