Correlation Between United States and China International
Can any of the company-specific risk be diversified away by investing in both United States and China International 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 United States and China International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and China International Marine, you can compare the effects of market volatilities on United States and China International 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 United States with a short position of China International. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and China International.
Diversification Opportunities for United States and China International
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and China is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and China International Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China International and United States 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 United States Steel are associated (or correlated) with China International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China International has no effect on the direction of United States i.e., United States and China International go up and down completely randomly.
Pair Corralation between United States and China International
Assuming the 90 days trading horizon United States is expected to generate 117.0 times less return on investment than China International. But when comparing it to its historical volatility, United States Steel is 1.4 times less risky than China International. It trades about 0.0 of its potential returns per unit of risk. China International Marine is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 58.00 in China International Marine on October 26, 2024 and sell it today you would lose (2.00) from holding China International Marine or give up 3.45% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.2% |
Values | Daily Returns |
United States Steel vs. China International Marine
Performance |
Timeline |
United States Steel |
China International |
United States and China International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United States and China International
The main advantage of trading using opposite United States and China International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, China International 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 International will offset losses from the drop in China International's long position.United States vs. Clean Energy Fuels | United States vs. Corporate Office Properties | United States vs. NXP Semiconductors NV | United States vs. JAPAN TOBACCO UNSPADR12 |
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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 Stocks Directory module to find actively traded stocks across global markets.
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