Correlation Between China Life and Focused Dynamic

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Can any of the company-specific risk be diversified away by investing in both China Life and Focused Dynamic 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 Focused Dynamic 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 Focused Dynamic Growth, you can compare the effects of market volatilities on China Life and Focused Dynamic 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 Focused Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Focused Dynamic.

Diversification Opportunities for China Life and Focused Dynamic

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between China and Focused is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Focused Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focused Dynamic Growth 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 Focused Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focused Dynamic Growth has no effect on the direction of China Life i.e., China Life and Focused Dynamic go up and down completely randomly.

Pair Corralation between China Life and Focused Dynamic

Considering the 90-day investment horizon China Life Insurance is expected to under-perform the Focused Dynamic. But the stock apears to be less risky and, when comparing its historical volatility, China Life Insurance is 1.64 times less risky than Focused Dynamic. The stock trades about -0.18 of its potential returns per unit of risk. The Focused Dynamic Growth is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  3,976  in Focused Dynamic Growth on May 19, 2022 and sell it today you would earn a total of  723.00  from holding Focused Dynamic Growth or generate 18.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

China Life Insurance  vs.  Focused Dynamic Growth

 Performance (%) 
       Timeline  
China Life Insurance 
China Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 3 (%) 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 new stock price disturbance, may contribute to short-term losses for the investors.

China Price Channel

Focused Dynamic Growth 
Focused Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Focused Dynamic Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Focused Dynamic showed solid returns over the last few months and may actually be approaching a breakup point.

Focused Price Channel

China Life and Focused Dynamic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Life and Focused Dynamic

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

China Life Insurance

Pair trading matchups for China Life

The idea behind China Life Insurance and Focused Dynamic Growth 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.

Focused Dynamic Growth

Pair trading matchups for Focused Dynamic

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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