Correlation Between New China and Shandong
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By analyzing existing cross correlation between New China Life and Shandong Hi Speed RoadBridge, you can compare the effects of market volatilities on New China and Shandong 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 New China with a short position of Shandong. Check out your portfolio center. Please also check ongoing floating volatility patterns of New China and Shandong.
Diversification Opportunities for New China and Shandong
Almost no diversification
The 3 months correlation between New and Shandong is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding New China Life and Shandong Hi Speed RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Hi Speed and New China 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 New China Life are associated (or correlated) with Shandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Hi Speed has no effect on the direction of New China i.e., New China and Shandong go up and down completely randomly.
Pair Corralation between New China and Shandong
Assuming the 90 days trading horizon New China Life is expected to generate 1.33 times more return on investment than Shandong. However, New China is 1.33 times more volatile than Shandong Hi Speed RoadBridge. It trades about 0.2 of its potential returns per unit of risk. Shandong Hi Speed RoadBridge is currently generating about 0.13 per unit of risk. If you would invest 3,324 in New China Life on September 23, 2024 and sell it today you would earn a total of 1,640 from holding New China Life or generate 49.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
New China Life vs. Shandong Hi Speed RoadBridge
Performance |
Timeline |
New China Life |
Shandong Hi Speed |
New China and Shandong Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with New China and Shandong
The main advantage of trading using opposite New China and Shandong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New China position performs unexpectedly, Shandong 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 Shandong will offset losses from the drop in Shandong's long position.New China vs. Kweichow Moutai Co | New China vs. Shenzhen Mindray Bio Medical | New China vs. Jiangsu Pacific Quartz | New China vs. G bits Network Technology |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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