Correlation Between China Railway and WSP Global
Can any of the company-specific risk be diversified away by investing in both China Railway and WSP Global 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 Railway and WSP Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Railway Construction and WSP Global, you can compare the effects of market volatilities on China Railway and WSP Global 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 Railway with a short position of WSP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and WSP Global.
Diversification Opportunities for China Railway and WSP Global
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and WSP is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global and China Railway 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 Railway Construction are associated (or correlated) with WSP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WSP Global has no effect on the direction of China Railway i.e., China Railway and WSP Global go up and down completely randomly.
Pair Corralation between China Railway and WSP Global
If you would invest 16,400 in WSP Global on September 13, 2024 and sell it today you would earn a total of 400.00 from holding WSP Global or generate 2.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
China Railway Construction vs. WSP Global
Performance |
Timeline |
China Railway Constr |
WSP Global |
China Railway and WSP Global Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Railway and WSP Global
The main advantage of trading using opposite China Railway and WSP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway position performs unexpectedly, WSP Global 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 WSP Global will offset losses from the drop in WSP Global's long position.China Railway vs. China BlueChemical | China Railway vs. CVW CLEANTECH INC | China Railway vs. Darden Restaurants | China Railway vs. Silicon Motion Technology |
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Check out your portfolio center.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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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