Correlation Between Seaboard and China Reinsurance

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

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

Diversification Opportunities for Seaboard and China Reinsurance

0.64

Correlation Coefficient

Seaboard  China Reinsurance

Poor diversification

The 3 months correlation between Seaboard and China is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Seaboard and China Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reinsurance and Seaboard 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 Seaboard are associated (or correlated) with China Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reinsurance has no effect on the direction of Seaboard i.e., Seaboard and China Reinsurance go up and down completely randomly.

Pair Corralation between Seaboard and China Reinsurance

Assuming the 90 days horizon Seaboard is expected to generate 4.35 times less return on investment than China Reinsurance. But when comparing it to its historical volatility, Seaboard is 2.91 times less risky than China Reinsurance. It trades about 0.05 of its potential returns per unit of risk. China Reinsurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10.00  in China Reinsurance on December 29, 2024 and sell it today you would earn a total of  2.00  from holding China Reinsurance or generate 20.0% return on investment over 90 days.

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

Seaboard  vs.  China Reinsurance

Seaboard

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seaboard are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Seaboard may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China Reinsurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Reinsurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Reinsurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seaboard and China Reinsurance

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

The idea behind Seaboard and China Reinsurance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.