Correlation Between Chongqing Changan and AVIC Fund

Can any of the company-specific risk be diversified away by investing in both Chongqing Changan and AVIC Fund 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 Chongqing Changan and AVIC Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chongqing Changan Automobile and AVIC Fund Management, you can compare the effects of market volatilities on Chongqing Changan and AVIC Fund 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 Chongqing Changan with a short position of AVIC Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Changan and AVIC Fund.

Diversification Opportunities for Chongqing Changan and AVIC Fund

-0.06

Correlation Coefficient

Chongqing Changan  AVIC Fund

Good diversification

The 3 months correlation between Chongqing and AVIC is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile and AVIC Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC Fund Management and Chongqing Changan 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 Chongqing Changan Automobile are associated (or correlated) with AVIC Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC Fund Management has no effect on the direction of Chongqing Changan i.e., Chongqing Changan and AVIC Fund go up and down completely randomly.

Pair Corralation between Chongqing Changan and AVIC Fund

Assuming the 90 days trading horizon Chongqing Changan Automobile is expected to generate 6.02 times more return on investment than AVIC Fund. However, Chongqing Changan is 6.02 times more volatile than AVIC Fund Management. It trades about 0.09 of its potential returns per unit of risk. AVIC Fund Management is currently generating about 0.02 per unit of risk. If you would invest  329.00  in Chongqing Changan Automobile on September 1, 2024 and sell it today you would earn a total of  32.00  from holding Chongqing Changan Automobile or generate 9.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Chongqing Changan Automobile  vs.  AVIC Fund Management

Chongqing Changan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Changan Automobile are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Changan may actually be approaching a critical reversion point that can send shares even higher in December 2024.

AVIC Fund Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC Fund Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AVIC Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chongqing Changan and AVIC Fund

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

The idea behind Chongqing Changan Automobile and AVIC Fund 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.