Correlation Between Ultrashort China and Short Real

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

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

Diversification Opportunities for Ultrashort China and Short Real

0.2

Correlation Coefficient

Ultrashort China  Short Real

Modest diversification

The 3 months correlation between Ultrashort and Short is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ultrashort China Profund and Short Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Real Estate and Ultrashort China 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 Ultrashort China Profund are associated (or correlated) with Short Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Real Estate has no effect on the direction of Ultrashort China i.e., Ultrashort China and Short Real go up and down completely randomly.

Pair Corralation between Ultrashort China and Short Real

Assuming the 90 days horizon Ultrashort China Profund is expected to generate 3.6 times more return on investment than Short Real. However, Ultrashort China is 3.6 times more volatile than Short Real Estate. It trades about 0.1 of its potential returns per unit of risk. Short Real Estate is currently generating about 0.04 per unit of risk. If you would invest  304.00  in Ultrashort China Profund on October 11, 2024 and sell it today you would earn a total of  80.00  from holding Ultrashort China Profund or generate 26.32% return on investment over 90 days.

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

Ultrashort China Profund  vs.  Short Real Estate

Ultrashort China Profund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort China Profund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort China showed solid returns over the last few months and may actually be approaching a breakup point.

Short Real Estate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Short Real Estate are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Short Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultrashort China and Short Real

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

The idea behind Ultrashort China Profund and Short Real Estate 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.