Correlation Between Sichuan Hebang and AVIC Fund

Can any of the company-specific risk be diversified away by investing in both Sichuan Hebang and AVIC Fund 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 Sichuan Hebang and AVIC Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Hebang Biotechnology and AVIC Fund Management, you can compare the effects of market volatilities on Sichuan Hebang and AVIC Fund 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 Sichuan Hebang with a short position of AVIC Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Hebang and AVIC Fund.

Diversification Opportunities for Sichuan Hebang and AVIC Fund

0.19

Correlation Coefficient

Sichuan Hebang  AVIC Fund

Average diversification

The 3 months correlation between Sichuan and AVIC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Hebang Biotechnology and AVIC Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC Fund Management and Sichuan Hebang 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 Sichuan Hebang Biotechnology are associated (or correlated) with AVIC Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC Fund Management has no effect on the direction of Sichuan Hebang i.e., Sichuan Hebang and AVIC Fund go up and down completely randomly.

Pair Corralation between Sichuan Hebang and AVIC Fund

Assuming the 90 days trading horizon Sichuan Hebang Biotechnology is expected to generate 7.88 times more return on investment than AVIC Fund. However, Sichuan Hebang is 7.88 times more volatile than AVIC Fund Management. It trades about 0.15 of its potential returns per unit of risk. AVIC Fund Management is currently generating about 0.11 per unit of risk. If you would invest  174.00  in Sichuan Hebang Biotechnology on September 4, 2024 and sell it today you would earn a total of  41.00  from holding Sichuan Hebang Biotechnology or generate 23.56% return on investment over 90 days.

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

Sichuan Hebang Biotechnology  vs.  AVIC Fund Management

Sichuan Hebang Biote

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Hebang Biotechnology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Hebang sustained solid returns over the last few months and may actually be approaching a breakup point.

AVIC Fund Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC Fund Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AVIC Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sichuan Hebang and AVIC Fund

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

The idea behind Sichuan Hebang Biotechnology and AVIC Fund Management 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.