Correlation Between CHINA EAST and AXWAY SOFTWARE

Can any of the company-specific risk be diversified away by investing in both CHINA EAST and AXWAY SOFTWARE 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 EAST and AXWAY SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHINA EAST ED and AXWAY SOFTWARE EO, you can compare the effects of market volatilities on CHINA EAST and AXWAY SOFTWARE 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 EAST with a short position of AXWAY SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EAST and AXWAY SOFTWARE.

Diversification Opportunities for CHINA EAST and AXWAY SOFTWARE

0.03

Correlation Coefficient

CHINA EAST  AXWAY SOFTWARE

Significant diversification

The 3 months correlation between CHINA and AXWAY is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EAST ED and AXWAY SOFTWARE EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXWAY SOFTWARE EO and CHINA EAST 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 EAST ED are associated (or correlated) with AXWAY SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXWAY SOFTWARE EO has no effect on the direction of CHINA EAST i.e., CHINA EAST and AXWAY SOFTWARE go up and down completely randomly.

Pair Corralation between CHINA EAST and AXWAY SOFTWARE

Assuming the 90 days horizon CHINA EAST ED is expected to under-perform the AXWAY SOFTWARE. In addition to that, CHINA EAST is 1.75 times more volatile than AXWAY SOFTWARE EO. It trades about -0.2 of its total potential returns per unit of risk. AXWAY SOFTWARE EO is currently generating about -0.05 per unit of volatility. If you would invest  2,730  in AXWAY SOFTWARE EO on October 10, 2024 and sell it today you would lose (80.00) from holding AXWAY SOFTWARE EO or give up 2.93% of portfolio value over 90 days.

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

CHINA EAST ED  vs.  AXWAY SOFTWARE EO

CHINA EAST ED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EAST ED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

AXWAY SOFTWARE EO

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AXWAY SOFTWARE EO are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AXWAY SOFTWARE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CHINA EAST and AXWAY SOFTWARE

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

The idea behind CHINA EAST ED and AXWAY SOFTWARE EO 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.