Correlation Between Sino Land and China Vanke

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

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

Diversification Opportunities for Sino Land and China Vanke

0.49

Correlation Coefficient

Sino Land  China Vanke

Very weak diversification

The 3 months correlation between Sino and China is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sino Land Co and China Vanke Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Vanke and Sino Land 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 Sino Land Co are associated (or correlated) with China Vanke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Vanke has no effect on the direction of Sino Land i.e., Sino Land and China Vanke go up and down completely randomly.

Pair Corralation between Sino Land and China Vanke

Assuming the 90 days horizon Sino Land is expected to generate 13.43 times less return on investment than China Vanke. But when comparing it to its historical volatility, Sino Land Co is 5.85 times less risky than China Vanke. It trades about 0.02 of its potential returns per unit of risk. China Vanke Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  35.00  in China Vanke Co on October 26, 2024 and sell it today you would earn a total of  0.00  from holding China Vanke Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Sino Land Co  vs.  China Vanke Co

Sino Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sino Land Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sino Land is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Vanke

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Vanke Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, China Vanke is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sino Land and China Vanke

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

The idea behind Sino Land Co and China Vanke Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.