Correlation Between Sino Land and China Overseas

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

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

Diversification Opportunities for Sino Land and China Overseas

-0.22

Correlation Coefficient

Sino Land  China Overseas

Very good diversification

The 3 months correlation between Sino and China is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sino Land 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 Sino Land 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 Sino Land 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 Sino Land i.e., Sino Land and China Overseas go up and down completely randomly.

Pair Corralation between Sino Land and China Overseas

Assuming the 90 days horizon Sino Land is expected to generate 1.46 times more return on investment than China Overseas. However, Sino Land is 1.46 times more volatile than China Overseas Land. It trades about 0.14 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.04 per unit of risk. If you would invest  54.00  in Sino Land on September 24, 2024 and sell it today you would earn a total of  39.00  from holding Sino Land or generate 72.22% return on investment over 90 days.

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

Sino Land  vs.  China Overseas Land

Sino Land

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Land are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sino Land reported solid returns over the last few months and may actually be approaching a breakup point.

China Overseas Land

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sino Land and China Overseas

The main advantage of trading using opposite Sino Land and China Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino Land 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 Sino Land 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.