Correlation Between China Health and Continental

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

By analyzing existing cross correlation between China Health Industries and Continental AG PK, you can compare the effects of market volatilities on China Health and Continental 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 Health with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Health and Continental.

Diversification Opportunities for China Health and Continental

-0.42

Correlation Coefficient

China Health  Continental

Very good diversification

The 3 months correlation between China and Continental is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding China Health Industries and Continental AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental AG PK and China Health 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 Health Industries are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental AG PK has no effect on the direction of China Health i.e., China Health and Continental go up and down completely randomly.

Pair Corralation between China Health and Continental

Given the investment horizon of 90 days China Health Industries is expected to under-perform the Continental. In addition to that, China Health is 4.16 times more volatile than Continental AG PK. It trades about -0.14 of its total potential returns per unit of risk. Continental AG PK is currently generating about 0.08 per unit of volatility. If you would invest  650.00  in Continental AG PK on September 26, 2024 and sell it today you would earn a total of  13.00  from holding Continental AG PK or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

China Health Industries  vs.  Continental AG PK

China Health Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical 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.

Continental AG PK

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Continental AG PK are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Health and Continental

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

The idea behind China Health Industries and Continental AG PK 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.