Correlation Between Uwharrie Capital and China Everbright

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

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

Diversification Opportunities for Uwharrie Capital and China Everbright

0.66

Correlation Coefficient

Uwharrie Capital  China Everbright

Poor diversification

The 3 months correlation between Uwharrie and China is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Uwharrie Capital Corp and China Everbright Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Bank and Uwharrie Capital 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 Uwharrie Capital Corp are associated (or correlated) with China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Bank has no effect on the direction of Uwharrie Capital i.e., Uwharrie Capital and China Everbright go up and down completely randomly.

Pair Corralation between Uwharrie Capital and China Everbright

Given the investment horizon of 90 days Uwharrie Capital is expected to generate 4.91 times less return on investment than China Everbright. But when comparing it to its historical volatility, Uwharrie Capital Corp is 3.56 times less risky than China Everbright. It trades about 0.09 of its potential returns per unit of risk. China Everbright Bank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  28.00  in China Everbright Bank on September 2, 2024 and sell it today you would earn a total of  11.00  from holding China Everbright Bank or generate 39.29% return on investment over 90 days.

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

Uwharrie Capital Corp  vs.  China Everbright Bank

Uwharrie Capital Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Uwharrie Capital Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Uwharrie Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Everbright Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, China Everbright reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Uwharrie Capital and China Everbright

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

The idea behind Uwharrie Capital Corp and China Everbright Bank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.