Correlation Between Alexandria Real and China Life

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

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

Diversification Opportunities for Alexandria Real and China Life

-0.49

Correlation Coefficient

Alexandria Real  China Life

Very good diversification

The 3 months correlation between Alexandria and China is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and Alexandria Real 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 Alexandria Real Estate are associated (or correlated) with China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Alexandria Real i.e., Alexandria Real and China Life go up and down completely randomly.

Pair Corralation between Alexandria Real and China Life

Considering the 90-day investment horizon Alexandria Real Estate is expected to under-perform the China Life. But the stock apears to be less risky and, when comparing its historical volatility, Alexandria Real Estate is 3.47 times less risky than China Life. The stock trades about -0.15 of its potential returns per unit of risk. The China Life Insurance is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  140.00  in China Life Insurance on September 12, 2024 and sell it today you would earn a total of  70.00  from holding China Life Insurance or generate 50.0% return on investment over 90 days.

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

Alexandria Real Estate  vs.  China Life Insurance

Alexandria Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alexandria Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

China Life Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, China Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alexandria Real and China Life

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

The idea behind Alexandria Real Estate and China Life Insurance 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.