Correlation Between Xiamen CD and China Vanke

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

By analyzing existing cross correlation between Xiamen CD and China Vanke Co, you can compare the effects of market volatilities on Xiamen CD and China Vanke 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 Xiamen CD with a short position of China Vanke. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen CD and China Vanke.

Diversification Opportunities for Xiamen CD and China Vanke

0.97

Correlation Coefficient

Xiamen CD  China Vanke

Almost no diversification

The 3 months correlation between Xiamen and China is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen CD and China Vanke Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Vanke and Xiamen CD 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 Xiamen CD are associated (or correlated) with China Vanke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Vanke has no effect on the direction of Xiamen CD i.e., Xiamen CD and China Vanke go up and down completely randomly.

Pair Corralation between Xiamen CD and China Vanke

Assuming the 90 days trading horizon Xiamen CD is expected to generate 0.89 times more return on investment than China Vanke. However, Xiamen CD is 1.13 times less risky than China Vanke. It trades about 0.2 of its potential returns per unit of risk. China Vanke Co is currently generating about 0.16 per unit of risk. If you would invest  718.00  in Xiamen CD on September 4, 2024 and sell it today you would earn a total of  285.00  from holding Xiamen CD or generate 39.69% return on investment over 90 days.

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

Xiamen CD  vs.  China Vanke Co

Xiamen CD

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen CD are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen CD sustained solid returns over the last few months and may actually be approaching a breakup point.

China Vanke

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Xiamen CD and China Vanke

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

The idea behind Xiamen CD and China Vanke Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..