Correlation Between Chuangs China and China Overseas

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

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

Diversification Opportunities for Chuangs China and China Overseas

0.37

Correlation Coefficient

Chuangs China  China Overseas

Weak diversification

The 3 months correlation between Chuangs and China is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments 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 Chuangs China 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 Chuangs China Investments 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 Chuangs China i.e., Chuangs China and China Overseas go up and down completely randomly.

Pair Corralation between Chuangs China and China Overseas

Assuming the 90 days horizon Chuangs China Investments is expected to generate 1.78 times more return on investment than China Overseas. However, Chuangs China is 1.78 times more volatile than China Overseas Land. It trades about 0.15 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  1.00  in Chuangs China Investments on May 16, 2025 and sell it today you would earn a total of  0.40  from holding Chuangs China Investments or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Chuangs China Investments  vs.  China Overseas Land

Chuangs China Investments

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chuangs China Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chuangs China reported solid returns over the last few months and may actually be approaching a breakup point.

China Overseas Land

Risk-Adjusted Performance

Weak

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 stable basic indicators, China Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chuangs China and China Overseas

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.