Correlation Between China Infrastructure and Herborium

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

Diversification Opportunities for China Infrastructure and Herborium

-0.12

Correlation Coefficient

China Infrastructure  Herborium

Good diversification

The 3 months correlation between China and Herborium is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding China Infrastructure Construct and Herborium Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herborium Group 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 Herborium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herborium Group has no effect on the direction of China Infrastructure i.e., China Infrastructure and Herborium go up and down completely randomly.

Pair Corralation between China Infrastructure and Herborium

If you would invest  0.01  in Herborium Group on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Herborium Group or generate 0.0% return on investment over 90 days.

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

China Infrastructure Construct  vs.  Herborium Group

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.

Herborium Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Herborium Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Herborium is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with China Infrastructure and Herborium

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

The idea behind China Infrastructure Construction and Herborium Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.