Correlation Between Hunan Investment and China Asset

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

By analyzing existing cross correlation between Hunan Investment Group and China Asset Management, you can compare the effects of market volatilities on Hunan Investment and China Asset 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 Hunan Investment with a short position of China Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Investment and China Asset.

Diversification Opportunities for Hunan Investment and China Asset

0.43

Correlation Coefficient

Hunan Investment  China Asset

Very weak diversification

The 3 months correlation between Hunan and China is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and China Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Asset Management and Hunan Investment 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 Hunan Investment Group are associated (or correlated) with China Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Asset Management has no effect on the direction of Hunan Investment i.e., Hunan Investment and China Asset go up and down completely randomly.

Pair Corralation between Hunan Investment and China Asset

Assuming the 90 days trading horizon Hunan Investment Group is expected to generate 3.12 times more return on investment than China Asset. However, Hunan Investment is 3.12 times more volatile than China Asset Management. It trades about 0.05 of its potential returns per unit of risk. China Asset Management is currently generating about 0.16 per unit of risk. If you would invest  486.00  in Hunan Investment Group on September 27, 2024 and sell it today you would earn a total of  34.00  from holding Hunan Investment Group or generate 7.0% return on investment over 90 days.

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

Hunan Investment Group  vs.  China Asset Management

Hunan Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Asset Management

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hunan Investment and China Asset

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

The idea behind Hunan Investment Group and China Asset Management 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.