Correlation Between China Everbright and Unisplendour Corp

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

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

Diversification Opportunities for China Everbright and Unisplendour Corp

0.78

Correlation Coefficient

China Everbright  Unisplendour Corp

Poor diversification

The 3 months correlation between China and Unisplendour is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding China Everbright Bank and Unisplendour Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unisplendour Corp and China Everbright 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 Everbright Bank are associated (or correlated) with Unisplendour Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unisplendour Corp has no effect on the direction of China Everbright i.e., China Everbright and Unisplendour Corp go up and down completely randomly.

Pair Corralation between China Everbright and Unisplendour Corp

Assuming the 90 days trading horizon China Everbright is expected to generate 1.54 times less return on investment than Unisplendour Corp. But when comparing it to its historical volatility, China Everbright Bank is 1.88 times less risky than Unisplendour Corp. It trades about 0.2 of its potential returns per unit of risk. Unisplendour Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,855  in Unisplendour Corp on September 12, 2024 and sell it today you would earn a total of  643.00  from holding Unisplendour Corp or generate 34.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

China Everbright Bank  vs.  Unisplendour Corp

China Everbright Bank

Risk-Adjusted Performance

15 of 100

Good

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

Unisplendour Corp

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with China Everbright and Unisplendour Corp

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

The idea behind China Everbright Bank and Unisplendour Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.