Correlation Between China Infrastructure and Athenex

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

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

Diversification Opportunities for China Infrastructure and Athenex

0.54

Correlation Coefficient

China Infrastructure  Athenex

Very weak diversification

The 3 months correlation between China and Athenex is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding China Infrastructure Construct and Athenex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athenex and China Infrastructure 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 Infrastructure Construction are associated (or correlated) with Athenex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athenex has no effect on the direction of China Infrastructure i.e., China Infrastructure and Athenex go up and down completely randomly.

Pair Corralation between China Infrastructure and Athenex

Given the investment horizon of 90 days China Infrastructure Construction is expected to generate 0.85 times more return on investment than Athenex. However, China Infrastructure Construction is 1.18 times less risky than Athenex. It trades about 0.03 of its potential returns per unit of risk. Athenex is currently generating about -0.15 per unit of risk. If you would invest  0.07  in China Infrastructure Construction on September 12, 2024 and sell it today you would lose (0.03) from holding China Infrastructure Construction or give up 42.86% of portfolio value over 90 days.

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

China Infrastructure Construct  vs.  Athenex

China Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Infrastructure Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, China Infrastructure is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Athenex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Athenex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Athenex 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 Infrastructure and Athenex

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

The idea behind China Infrastructure Construction and Athenex 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..