Correlation Between CHINA HUARONG and AP Møller

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

By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and AP Mller , you can compare the effects of market volatilities on CHINA HUARONG and AP Møller 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 HUARONG with a short position of AP Møller. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and AP Møller.

Diversification Opportunities for CHINA HUARONG and AP Møller

-0.16

Correlation Coefficient

CHINA HUARONG  AP Møller

Good diversification

The 3 months correlation between CHINA and DP4B is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller and CHINA HUARONG 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 HUARONG ENERHD 50 are associated (or correlated) with AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and AP Møller go up and down completely randomly.

Pair Corralation between CHINA HUARONG and AP Møller

Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 11.32 times more return on investment than AP Møller. However, CHINA HUARONG is 11.32 times more volatile than AP Mller . It trades about 0.14 of its potential returns per unit of risk. AP Mller is currently generating about 0.1 per unit of risk. If you would invest  0.05  in CHINA HUARONG ENERHD 50 on September 18, 2024 and sell it today you would earn a total of  0.10  from holding CHINA HUARONG ENERHD 50 or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

CHINA HUARONG ENERHD 50  vs.  AP Mller

CHINA HUARONG ENERHD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

AP Møller

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA HUARONG and AP Møller

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

The idea behind CHINA HUARONG ENERHD 50 and AP Mller 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.