Correlation Between China Infrastructure and Stem Holdings

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

Diversification Opportunities for China Infrastructure and Stem Holdings

0.0

Correlation Coefficient

China Infrastructure  Stem Holdings

Pay attention - limited upside

The 3 months correlation between China and Stem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Infrastructure Construct and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings 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 Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of China Infrastructure i.e., China Infrastructure and Stem Holdings go up and down completely randomly.

Pair Corralation between China Infrastructure and Stem Holdings

If you would invest  1.00  in Stem Holdings on September 20, 2024 and sell it today you would earn a total of  0.00  from holding Stem Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

China Infrastructure Construct  vs.  Stem Holdings

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.

Stem Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stem Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Stem Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with China Infrastructure and Stem Holdings

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

The idea behind China Infrastructure Construction and Stem Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.