Correlation Between Vanfund Urban and Huaneng Lancang

Can any of the company-specific risk be diversified away by investing in both Vanfund Urban and Huaneng Lancang 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 Vanfund Urban and Huaneng Lancang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanfund Urban Investment and Huaneng Lancang River, you can compare the effects of market volatilities on Vanfund Urban and Huaneng Lancang 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 Vanfund Urban with a short position of Huaneng Lancang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanfund Urban and Huaneng Lancang.

Diversification Opportunities for Vanfund Urban and Huaneng Lancang

-0.81

Correlation Coefficient

Vanfund Urban  Huaneng Lancang

Pay attention - limited upside

The 3 months correlation between Vanfund and Huaneng is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanfund Urban Investment and Huaneng Lancang River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Lancang River and Vanfund Urban 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 Vanfund Urban Investment are associated (or correlated) with Huaneng Lancang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Lancang River has no effect on the direction of Vanfund Urban i.e., Vanfund Urban and Huaneng Lancang go up and down completely randomly.

Pair Corralation between Vanfund Urban and Huaneng Lancang

Assuming the 90 days trading horizon Vanfund Urban Investment is expected to generate 2.14 times more return on investment than Huaneng Lancang. However, Vanfund Urban is 2.14 times more volatile than Huaneng Lancang River. It trades about 0.26 of its potential returns per unit of risk. Huaneng Lancang River is currently generating about -0.07 per unit of risk. If you would invest  359.00  in Vanfund Urban Investment on September 16, 2024 and sell it today you would earn a total of  243.00  from holding Vanfund Urban Investment or generate 67.69% return on investment over 90 days.

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

Vanfund Urban Investment  vs.  Huaneng Lancang River

Vanfund Urban Investment

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanfund Urban Investment are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vanfund Urban sustained solid returns over the last few months and may actually be approaching a breakup point.

Huaneng Lancang River

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaneng Lancang River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vanfund Urban and Huaneng Lancang

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

The idea behind Vanfund Urban Investment and Huaneng Lancang River 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.