Correlation Between China Liberal and Continental

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

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

Diversification Opportunities for China Liberal and Continental

-0.59

Correlation Coefficient

China Liberal  Continental

Excellent diversification

The 3 months correlation between China and Continental is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding China Liberal Education 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 Liberal 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 Liberal Education 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 Liberal i.e., China Liberal and Continental go up and down completely randomly.

Pair Corralation between China Liberal and Continental

Given the investment horizon of 90 days China Liberal Education is expected to under-perform the Continental. In addition to that, China Liberal is 2.02 times more volatile than Continental AG PK. It trades about -0.18 of its total potential returns per unit of risk. Continental AG PK is currently generating about 0.03 per unit of volatility. If you would invest  641.00  in Continental AG PK on September 26, 2024 and sell it today you would earn a total of  22.00  from holding Continental AG PK or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

China Liberal Education  vs.  Continental AG PK

China Liberal Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Liberal Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Liberal and Continental

The main advantage of trading using opposite China Liberal and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Liberal 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 Liberal Education 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.