Correlation Between Rocket Internet and CHINA CONCH

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

By analyzing existing cross correlation between Rocket Internet SE and CHINA CH VENT, you can compare the effects of market volatilities on Rocket Internet and CHINA CONCH 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 Rocket Internet with a short position of CHINA CONCH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and CHINA CONCH.

Diversification Opportunities for Rocket Internet and CHINA CONCH

0.59

Correlation Coefficient

Rocket Internet  CHINA CONCH

Very weak diversification

The 3 months correlation between Rocket and CHINA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and CHINA CH VENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA CH VENT and Rocket Internet 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 Rocket Internet SE are associated (or correlated) with CHINA CONCH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA CH VENT has no effect on the direction of Rocket Internet i.e., Rocket Internet and CHINA CONCH go up and down completely randomly.

Pair Corralation between Rocket Internet and CHINA CONCH

Assuming the 90 days trading horizon Rocket Internet is expected to generate 1.87 times less return on investment than CHINA CONCH. But when comparing it to its historical volatility, Rocket Internet SE is 1.85 times less risky than CHINA CONCH. It trades about 0.08 of its potential returns per unit of risk. CHINA CH VENT is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  78.00  in CHINA CH VENT on December 21, 2024 and sell it today you would earn a total of  12.00  from holding CHINA CH VENT or generate 15.38% return on investment over 90 days.

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

Rocket Internet SE  vs.  CHINA CH VENT

Rocket Internet SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Rocket Internet may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CHINA CH VENT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA CH VENT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CHINA CONCH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocket Internet and CHINA CONCH

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

The idea behind Rocket Internet SE and CHINA CH VENT 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.