Correlation Between City Developments and China Evergrande
Can any of the company-specific risk be diversified away by investing in both City Developments and China Evergrande 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 City Developments and China Evergrande into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between City Developments Limited and China Evergrande Group, you can compare the effects of market volatilities on City Developments and China Evergrande 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 City Developments with a short position of China Evergrande. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Developments and China Evergrande.
Diversification Opportunities for City Developments and China Evergrande
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between City and China is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding City Developments Limited and China Evergrande Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Evergrande and City Developments 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 City Developments Limited are associated (or correlated) with China Evergrande. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Evergrande has no effect on the direction of City Developments i.e., City Developments and China Evergrande go up and down completely randomly.
Pair Corralation between City Developments and China Evergrande
If you would invest 436.00 in City Developments Limited on January 26, 2024 and sell it today you would earn a total of 6.00 from holding City Developments Limited or generate 1.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 4.76% |
Values | Daily Returns |
City Developments Limited vs. China Evergrande Group
Performance |
Timeline |
City Developments |
China Evergrande |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
City Developments and China Evergrande Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with City Developments and China Evergrande
The main advantage of trading using opposite City Developments and China Evergrande positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Developments position performs unexpectedly, China Evergrande 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 Evergrande will offset losses from the drop in China Evergrande's long position.The idea behind City Developments Limited and China Evergrande Group 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.China Evergrande vs. Sino Land Co | China Evergrande vs. Holiday Island Holdings | China Evergrande vs. Sun Hung Kai | China Evergrande vs. Bayport International Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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