Correlation Between Mind Gym and China Pacific

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

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

Diversification Opportunities for Mind Gym and China Pacific

-0.52

Correlation Coefficient

Mind Gym  China Pacific

Excellent diversification

The 3 months correlation between Mind and China is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mind Gym and China Pacific Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Pacific Insurance and Mind Gym 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 Mind Gym are associated (or correlated) with China Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Pacific Insurance has no effect on the direction of Mind Gym i.e., Mind Gym and China Pacific go up and down completely randomly.

Pair Corralation between Mind Gym and China Pacific

Assuming the 90 days trading horizon Mind Gym is expected to under-perform the China Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Mind Gym is 2.22 times less risky than China Pacific. The stock trades about -0.06 of its potential returns per unit of risk. The China Pacific Insurance is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,900  in China Pacific Insurance on August 10, 2024 and sell it today you would earn a total of  780.00  from holding China Pacific Insurance or generate 41.05% return on investment over 90 days.

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

Mind Gym  vs.  China Pacific Insurance

Mind Gym

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mind Gym has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

China Pacific Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Pacific Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, China Pacific unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mind Gym and China Pacific

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

The idea behind Mind Gym and China Pacific Insurance 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.