Correlation Between CHINA HUARONG and Daito Trust
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and Daito Trust 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 CHINA HUARONG and Daito Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and Daito Trust Construction, you can compare the effects of market volatilities on CHINA HUARONG and Daito Trust 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 CHINA HUARONG with a short position of Daito Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Daito Trust.
Diversification Opportunities for CHINA HUARONG and Daito Trust
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHINA and Daito is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Daito Trust Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daito Trust Construction and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 are associated (or correlated) with Daito Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daito Trust Construction has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Daito Trust go up and down completely randomly.
Pair Corralation between CHINA HUARONG and Daito Trust
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 20.12 times more return on investment than Daito Trust. However, CHINA HUARONG is 20.12 times more volatile than Daito Trust Construction. It trades about 0.04 of its potential returns per unit of risk. Daito Trust Construction is currently generating about -0.12 per unit of risk. If you would invest 0.20 in CHINA HUARONG ENERHD 50 on December 2, 2024 and sell it today you would lose (0.10) from holding CHINA HUARONG ENERHD 50 or give up 50.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. Daito Trust Construction
Performance |
Timeline |
CHINA HUARONG ENERHD |
Daito Trust Construction |
CHINA HUARONG and Daito Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CHINA HUARONG and Daito Trust
The main advantage of trading using opposite CHINA HUARONG and Daito Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, Daito Trust 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 Daito Trust will offset losses from the drop in Daito Trust's long position.CHINA HUARONG vs. TITAN MACHINERY | CHINA HUARONG vs. FUYO GENERAL LEASE | CHINA HUARONG vs. Global Ship Lease | CHINA HUARONG vs. Daito Trust Construction |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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