Correlation Between Peoples Insurance and China World

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

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

Diversification Opportunities for Peoples Insurance and China World

-0.18

Correlation Coefficient

Peoples Insurance  China World

Good diversification

The 3 months correlation between Peoples and China is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Peoples Insurance of and China World Trade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China World Trade and Peoples Insurance 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 Peoples Insurance of are associated (or correlated) with China World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China World Trade has no effect on the direction of Peoples Insurance i.e., Peoples Insurance and China World go up and down completely randomly.

Pair Corralation between Peoples Insurance and China World

Assuming the 90 days trading horizon Peoples Insurance of is expected to generate 1.24 times more return on investment than China World. However, Peoples Insurance is 1.24 times more volatile than China World Trade. It trades about 0.03 of its potential returns per unit of risk. China World Trade is currently generating about -0.09 per unit of risk. If you would invest  744.00  in Peoples Insurance of on September 29, 2024 and sell it today you would earn a total of  23.00  from holding Peoples Insurance of or generate 3.09% return on investment over 90 days.

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

Peoples Insurance of  vs.  China World Trade

Peoples Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Peoples Insurance of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Peoples Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China World Trade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China World Trade 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 Peoples Insurance and China World

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

The idea behind Peoples Insurance of and China World Trade 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.