Correlation Between China Life and HITHINK ROYALFLUSH

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Can any of the company-specific risk be diversified away by investing in both China Life and HITHINK ROYALFLUSH 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 China Life and HITHINK ROYALFLUSH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Life Insurance and HITHINK ROYALFLUSH, you can compare the effects of market volatilities on China Life and HITHINK ROYALFLUSH 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 China Life with a short position of HITHINK ROYALFLUSH. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and HITHINK ROYALFLUSH.

Diversification Opportunities for China Life and HITHINK ROYALFLUSH

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between China and HITHINK is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and HITHINK ROYALFLUSH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HITHINK ROYALFLUSH and China Life 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 China Life Insurance are associated (or correlated) with HITHINK ROYALFLUSH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HITHINK ROYALFLUSH has no effect on the direction of China Life i.e., China Life and HITHINK ROYALFLUSH go up and down completely randomly.

Pair Corralation between China Life and HITHINK ROYALFLUSH

Considering the 90-day investment horizon China Life Insurance is expected to under-perform the HITHINK ROYALFLUSH. But the stock apears to be less risky and, when comparing its historical volatility, China Life Insurance is 2.13 times less risky than HITHINK ROYALFLUSH. The stock trades about -0.21 of its potential returns per unit of risk. The HITHINK ROYALFLUSH is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8,847  in HITHINK ROYALFLUSH on May 21, 2022 and sell it today you would lose (177.00)  from holding HITHINK ROYALFLUSH or give up 2.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy86.36%
ValuesDaily Returns

China Life Insurance  vs.  HITHINK ROYALFLUSH

 Performance (%) 
       Timeline  
China Life Insurance 
China Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, China Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Price Channel

HITHINK ROYALFLUSH 
HITHINK Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in HITHINK ROYALFLUSH are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HITHINK ROYALFLUSH may actually be approaching a critical reversion point that can send shares even higher in September 2022.

HITHINK Price Channel

China Life and HITHINK ROYALFLUSH Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Life and HITHINK ROYALFLUSH

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

China Life Insurance

Pair trading matchups for China Life

The idea behind China Life Insurance and HITHINK ROYALFLUSH 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.

HITHINK ROYALFLUSH

Pair trading matchups for HITHINK ROYALFLUSH

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against HITHINK ROYALFLUSH as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. HITHINK ROYALFLUSH's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, HITHINK ROYALFLUSH's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to HITHINK ROYALFLUSH.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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