Correlation Between Overseas Chinese and China Minsh

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

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

Diversification Opportunities for Overseas Chinese and China Minsh

-0.1

Correlation Coefficient

Overseas Chinese  China Minsh

Good diversification

The 3 months correlation between Overseas and China is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Overseas Chinese Banking and China Minsh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Minsh and Overseas Chinese 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 Overseas Chinese Banking are associated (or correlated) with China Minsh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Minsh has no effect on the direction of Overseas Chinese i.e., Overseas Chinese and China Minsh go up and down completely randomly.

Pair Corralation between Overseas Chinese and China Minsh

Assuming the 90 days horizon Overseas Chinese is expected to generate 6.7 times less return on investment than China Minsh. But when comparing it to its historical volatility, Overseas Chinese Banking is 1.56 times less risky than China Minsh. It trades about 0.03 of its potential returns per unit of risk. China Minsh is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  328.00  in China Minsh on September 12, 2024 and sell it today you would earn a total of  70.00  from holding China Minsh or generate 21.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Overseas Chinese Banking  vs.  China Minsh

Overseas Chinese Banking

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Overseas Chinese Banking are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Overseas Chinese is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Minsh

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Minsh are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, China Minsh showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Overseas Chinese and China Minsh

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

The idea behind Overseas Chinese Banking and China Minsh 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.