Correlation Between Iat Automobile and China Everbright

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

By analyzing existing cross correlation between Iat Automobile Technology and China Everbright Bank, you can compare the effects of market volatilities on Iat Automobile and China Everbright 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 Iat Automobile with a short position of China Everbright. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iat Automobile and China Everbright.

Diversification Opportunities for Iat Automobile and China Everbright

0.8

Correlation Coefficient

Iat Automobile  China Everbright

Very poor diversification

The 3 months correlation between Iat and China is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Iat Automobile Technology and China Everbright Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Bank and Iat Automobile 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 Iat Automobile Technology are associated (or correlated) with China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Bank has no effect on the direction of Iat Automobile i.e., Iat Automobile and China Everbright go up and down completely randomly.

Pair Corralation between Iat Automobile and China Everbright

Assuming the 90 days trading horizon Iat Automobile Technology is expected to generate 2.3 times more return on investment than China Everbright. However, Iat Automobile is 2.3 times more volatile than China Everbright Bank. It trades about 0.16 of its potential returns per unit of risk. China Everbright Bank is currently generating about 0.17 per unit of risk. If you would invest  914.00  in Iat Automobile Technology on September 5, 2024 and sell it today you would earn a total of  391.00  from holding Iat Automobile Technology or generate 42.78% return on investment over 90 days.

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

Iat Automobile Technology  vs.  China Everbright Bank

Iat Automobile Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iat Automobile Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Iat Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

China Everbright Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Everbright sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iat Automobile and China Everbright

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

The idea behind Iat Automobile Technology and China Everbright Bank 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 Valuation module to check real value of public entities based on technical and fundamental data.