Correlation Between Mobileye Global and China Railway

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

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

Diversification Opportunities for Mobileye Global and China Railway

0.55

Correlation Coefficient

Mobileye Global  China Railway

Very weak diversification

The 3 months correlation between Mobileye and China is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Mobileye Global Class and China Railway Tielong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Tielong and Mobileye Global 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 Mobileye Global Class are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Tielong has no effect on the direction of Mobileye Global i.e., Mobileye Global and China Railway go up and down completely randomly.

Pair Corralation between Mobileye Global and China Railway

Given the investment horizon of 90 days Mobileye Global Class is expected to under-perform the China Railway. In addition to that, Mobileye Global is 3.77 times more volatile than China Railway Tielong. It trades about -0.08 of its total potential returns per unit of risk. China Railway Tielong is currently generating about -0.1 per unit of volatility. If you would invest  615.00  in China Railway Tielong on December 24, 2024 and sell it today you would lose (40.00) from holding China Railway Tielong or give up 6.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Mobileye Global Class  vs.  China Railway Tielong

Mobileye Global Class

Risk-Adjusted Performance

Very Weak

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

China Railway Tielong

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Railway Tielong has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Mobileye Global and China Railway

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

The idea behind Mobileye Global Class and China Railway Tielong 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.