Correlation Between CHINA HUARONG and Fifth Third

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

Diversification Opportunities for CHINA HUARONG and Fifth Third

0.08

Correlation Coefficient

CHINA HUARONG  Fifth Third

Significant diversification

The 3 months correlation between CHINA and Fifth is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Fifth Third go up and down completely randomly.

Pair Corralation between CHINA HUARONG and Fifth Third

Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 16.42 times more return on investment than Fifth Third. However, CHINA HUARONG is 16.42 times more volatile than Fifth Third Bancorp. It trades about 0.06 of its potential returns per unit of risk. Fifth Third Bancorp is currently generating about -0.1 per unit of risk. If you would invest  0.15  in CHINA HUARONG ENERHD 50 on December 3, 2024 and sell it today you would lose (0.05) from holding CHINA HUARONG ENERHD 50 or give up 33.33% of portfolio value over 90 days.

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

CHINA HUARONG ENERHD 50  vs.  Fifth Third Bancorp

CHINA HUARONG ENERHD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

Fifth Third Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CHINA HUARONG and Fifth Third

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

The idea behind CHINA HUARONG ENERHD 50 and Fifth Third Bancorp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.