Correlation Between REINET INVESTMENTS and China Railway

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

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

Diversification Opportunities for REINET INVESTMENTS and China Railway

0.16

Correlation Coefficient

REINET INVESTMENTS  China Railway

Average diversification

The 3 months correlation between REINET and China is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding REINET INVESTMENTS SCA and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group and REINET INVESTMENTS 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 REINET INVESTMENTS SCA 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 Group has no effect on the direction of REINET INVESTMENTS i.e., REINET INVESTMENTS and China Railway go up and down completely randomly.

Pair Corralation between REINET INVESTMENTS and China Railway

Assuming the 90 days horizon REINET INVESTMENTS SCA is expected to under-perform the China Railway. In addition to that, REINET INVESTMENTS is 1.41 times more volatile than China Railway Group. It trades about -0.04 of its total potential returns per unit of risk. China Railway Group is currently generating about -0.04 per unit of volatility. If you would invest  48.00  in China Railway Group on December 28, 2024 and sell it today you would lose (3.00) from holding China Railway Group or give up 6.25% of portfolio value over 90 days.

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

REINET INVESTMENTS SCA  vs.  China Railway Group

REINET INVESTMENTS SCA

Risk-Adjusted Performance

Very Weak

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

China Railway Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with REINET INVESTMENTS and China Railway

The main advantage of trading using opposite REINET INVESTMENTS and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REINET INVESTMENTS 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 REINET INVESTMENTS SCA and China Railway Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.