Correlation Between Rand Capital and China Fund

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

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

Diversification Opportunities for Rand Capital and China Fund

-0.43

Correlation Coefficient

Rand Capital  China Fund

Very good diversification

The 3 months correlation between Rand and China is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp and China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fund and Rand Capital 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 Rand Capital Corp are associated (or correlated) with China Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fund has no effect on the direction of Rand Capital i.e., Rand Capital and China Fund go up and down completely randomly.

Pair Corralation between Rand Capital and China Fund

Given the investment horizon of 90 days Rand Capital Corp is expected to generate 1.32 times more return on investment than China Fund. However, Rand Capital is 1.32 times more volatile than China Fund. It trades about 0.04 of its potential returns per unit of risk. China Fund is currently generating about 0.0 per unit of risk. If you would invest  1,249  in Rand Capital Corp on September 5, 2024 and sell it today you would earn a total of  423.00  from holding Rand Capital Corp or generate 33.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.08%
Values	Daily Returns

Rand Capital Corp  vs.  China Fund

Rand Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rand Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

China Fund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical indicators, China Fund displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rand Capital and China Fund

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

The idea behind Rand Capital Corp and China Fund 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.