Correlation Between Tri Pointe and China Overseas

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

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

Diversification Opportunities for Tri Pointe and China Overseas

0.57

Correlation Coefficient

Tri Pointe  China Overseas

Very weak diversification

The 3 months correlation between Tri and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes 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 Tri Pointe 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 Tri Pointe Homes 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 Tri Pointe i.e., Tri Pointe and China Overseas go up and down completely randomly.

Pair Corralation between Tri Pointe and China Overseas

Assuming the 90 days horizon Tri Pointe Homes is expected to generate 1.1 times more return on investment than China Overseas. However, Tri Pointe is 1.1 times more volatile than China Overseas Land. It trades about 0.01 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  3,020  in Tri Pointe Homes on June 1, 2025 and sell it today you would lose (20.00) from holding Tri Pointe Homes or give up 0.66% of portfolio value over 90 days.

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

Tri Pointe Homes  vs.  China Overseas Land

Tri Pointe Homes

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Tri Pointe Homes are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tri Pointe reported solid returns over the last few months and may actually be approaching a breakup point.

China Overseas Land

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Overseas may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Tri Pointe and China Overseas

The main advantage of trading using opposite Tri Pointe and China Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tri Pointe 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 Tri Pointe Homes 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.