Correlation Between China Life and Bus Online

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

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

Diversification Opportunities for China Life and Bus Online

0.73

Correlation Coefficient

China Life  Bus Online

Poor diversification

The 3 months correlation between China and Bus is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Bus Online Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bus Online and China Life 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 Life Insurance are associated (or correlated) with Bus Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bus Online has no effect on the direction of China Life i.e., China Life and Bus Online go up and down completely randomly.

Pair Corralation between China Life and Bus Online

Assuming the 90 days trading horizon China Life is expected to generate 1.12 times less return on investment than Bus Online. In addition to that, China Life is 1.09 times more volatile than Bus Online Co. It trades about 0.1 of its total potential returns per unit of risk. Bus Online Co is currently generating about 0.12 per unit of volatility. If you would invest  411.00  in Bus Online Co on September 19, 2024 and sell it today you would earn a total of  91.00  from holding Bus Online Co or generate 22.14% return on investment over 90 days.

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

China Life Insurance  vs.  Bus Online Co

China Life Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Bus Online

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bus Online Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bus Online sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Life and Bus Online

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

The idea behind China Life Insurance and Bus Online 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.