Correlation Between Markel and Chuangs China

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

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

Diversification Opportunities for Markel and Chuangs China

-0.1

Correlation Coefficient

Markel  Chuangs China

Good diversification

The 3 months correlation between Markel and Chuangs is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Markel and Chuangs China Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuangs China Investments and Markel 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 Markel are associated (or correlated) with Chuangs China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuangs China Investments has no effect on the direction of Markel i.e., Markel and Chuangs China go up and down completely randomly.

Pair Corralation between Markel and Chuangs China

Assuming the 90 days horizon Markel is expected to generate 0.29 times more return on investment than Chuangs China. However, Markel is 3.42 times less risky than Chuangs China. It trades about 0.05 of its potential returns per unit of risk. Chuangs China Investments is currently generating about -0.01 per unit of risk. If you would invest  121,100  in Markel on September 12, 2024 and sell it today you would earn a total of  43,900  from holding Markel or generate 36.25% return on investment over 90 days.

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

Markel  vs.  Chuangs China Investments

Markel

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Markel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Markel reported solid returns over the last few months and may actually be approaching a breakup point.

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Markel and Chuangs China

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

The idea behind Markel and Chuangs China Investments 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.