Correlation Between EGRNF and China Overseas

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

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

Diversification Opportunities for EGRNF and China Overseas

-0.24

Correlation Coefficient

EGRNF  China Overseas

Very good diversification

The 3 months correlation between EGRNF and China is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding EGRNF and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and EGRNF 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 EGRNF are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of EGRNF i.e., EGRNF and China Overseas go up and down completely randomly.

Pair Corralation between EGRNF and China Overseas

Assuming the 90 days horizon EGRNF is expected to generate 33.13 times more return on investment than China Overseas. However, EGRNF is 33.13 times more volatile than China Overseas Land. It trades about 0.16 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.07 per unit of risk. If you would invest  0.30  in EGRNF on September 3, 2024 and sell it today you would lose (0.27) from holding EGRNF or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

EGRNF  vs.  China Overseas Land

EGRNF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EGRNF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, EGRNF reported solid returns over the last few months and may actually be approaching a breakup point.

China Overseas Land

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with EGRNF and China Overseas

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

The idea behind EGRNF and China Overseas Land 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.