Correlation Between JSE and China Overseas

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

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

Diversification Opportunities for JSE and China Overseas

0.11

Correlation Coefficient

JSE  China Overseas

Average diversification

The 3 months correlation between JSE and China is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding JSE Limited and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and JSE 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 JSE Limited are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of JSE i.e., JSE and China Overseas go up and down completely randomly.

Pair Corralation between JSE and China Overseas

If you would invest  665.00  in JSE Limited on October 14, 2024 and sell it today you would earn a total of  0.00  from holding JSE Limited or generate 0.0% return on investment over 90 days.

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

JSE Limited  vs.  China Overseas Land

JSE Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, JSE reported solid returns over the last few months and may actually be approaching a breakup point.

China Overseas Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Overseas Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JSE and China Overseas

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

The idea behind JSE Limited and China Overseas Land 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 CEOs Directory module to screen CEOs from public companies around the world.