Correlation Between CHINA HUARONG and Assicurazioni Generali

Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and Assicurazioni Generali 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 Assicurazioni Generali 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 Assicurazioni Generali SpA, you can compare the effects of market volatilities on CHINA HUARONG and Assicurazioni Generali 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 Assicurazioni Generali. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Assicurazioni Generali.

Diversification Opportunities for CHINA HUARONG and Assicurazioni Generali

-0.72

Correlation Coefficient

CHINA HUARONG  Assicurazioni Generali

Pay attention - limited upside

The 3 months correlation between CHINA and Assicurazioni is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Assicurazioni Generali SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assicurazioni Generali 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 Assicurazioni Generali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assicurazioni Generali has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Assicurazioni Generali go up and down completely randomly.

Pair Corralation between CHINA HUARONG and Assicurazioni Generali

Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 18.5 times more return on investment than Assicurazioni Generali. However, CHINA HUARONG is 18.5 times more volatile than Assicurazioni Generali SpA. It trades about 0.02 of its potential returns per unit of risk. Assicurazioni Generali SpA is currently generating about 0.25 per unit of risk. If you would invest  0.15  in CHINA HUARONG ENERHD 50 on December 30, 2024 and sell it today you would lose (0.10) from holding CHINA HUARONG ENERHD 50 or give up 66.67% of portfolio value over 90 days.

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

CHINA HUARONG ENERHD 50  vs.  Assicurazioni Generali SpA

CHINA HUARONG ENERHD

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

Assicurazioni Generali

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Assicurazioni Generali SpA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Assicurazioni Generali reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA HUARONG and Assicurazioni Generali

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

The idea behind CHINA HUARONG ENERHD 50 and Assicurazioni Generali SpA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.