Correlation Between China Railway and ACS Actividades

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

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

Diversification Opportunities for China Railway and ACS Actividades

0.16

Correlation Coefficient

China Railway  ACS Actividades

Average diversification

The 3 months correlation between China and ACS is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and ACS Actividades De in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACS Actividades De and China Railway 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 Railway Group are associated (or correlated) with ACS Actividades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACS Actividades De has no effect on the direction of China Railway i.e., China Railway and ACS Actividades go up and down completely randomly.

Pair Corralation between China Railway and ACS Actividades

Assuming the 90 days horizon China Railway is expected to generate 58.44 times less return on investment than ACS Actividades. But when comparing it to its historical volatility, China Railway Group is 1.49 times less risky than ACS Actividades. It trades about 0.01 of its potential returns per unit of risk. ACS Actividades De is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  912.00  in ACS Actividades De on September 12, 2024 and sell it today you would earn a total of  89.00  from holding ACS Actividades De or generate 9.76% return on investment over 90 days.

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

China Railway Group  vs.  ACS Actividades De

China Railway Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

ACS Actividades De

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ACS Actividades De are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, ACS Actividades may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Railway and ACS Actividades

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

The idea behind China Railway Group and ACS Actividades De 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.