Correlation Between China Infrastructure and RIV Capital

Can any of the company-specific risk be diversified away by investing in both China Infrastructure and RIV Capital 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 RIV Capital 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 RIV Capital, you can compare the effects of market volatilities on China Infrastructure and RIV Capital 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 RIV Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Infrastructure and RIV Capital.

Diversification Opportunities for China Infrastructure and RIV Capital

0.31

Correlation Coefficient

China Infrastructure  RIV Capital

Weak diversification

The 3 months correlation between China and RIV is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Infrastructure Construct and RIV Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIV Capital 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 RIV Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIV Capital has no effect on the direction of China Infrastructure i.e., China Infrastructure and RIV Capital go up and down completely randomly.

Pair Corralation between China Infrastructure and RIV Capital

If you would invest  7.22  in RIV Capital on September 20, 2024 and sell it today you would lose (0.22) from holding RIV Capital or give up 3.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.53%
Values	Daily Returns

China Infrastructure Construct  vs.  RIV Capital

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.

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with China Infrastructure and RIV Capital

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

The idea behind China Infrastructure Construction and RIV Capital 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.