Correlation Between China Construction and TECO Electric
Can any of the company-specific risk be diversified away by investing in both China Construction and TECO Electric 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 Construction and TECO Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Construction Bank and TECO Electric Machinery, you can compare the effects of market volatilities on China Construction and TECO Electric 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 Construction with a short position of TECO Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and TECO Electric.
Diversification Opportunities for China Construction and TECO Electric
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and TECO is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and TECO Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TECO Electric Machinery and China Construction 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 Construction Bank are associated (or correlated) with TECO Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TECO Electric Machinery has no effect on the direction of China Construction i.e., China Construction and TECO Electric go up and down completely randomly.
Pair Corralation between China Construction and TECO Electric
Assuming the 90 days trading horizon China Construction Bank is expected to generate 0.45 times more return on investment than TECO Electric. However, China Construction Bank is 2.22 times less risky than TECO Electric. It trades about -0.01 of its potential returns per unit of risk. TECO Electric Machinery is currently generating about -0.01 per unit of risk. If you would invest 1,469 in China Construction Bank on November 28, 2024 and sell it today you would lose (22.00) from holding China Construction Bank or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. TECO Electric Machinery
Performance |
| Timeline |
| China Construction Bank |
| TECO Electric Machinery |
China Construction and TECO Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and TECO Electric
The main advantage of trading using opposite China Construction and TECO Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, TECO Electric 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 TECO Electric will offset losses from the drop in TECO Electric's long position.| China Construction vs. Shan Loong Transportation Co | China Construction vs. Universal Vision Biotechnology | China Construction vs. Grand Ocean Retail | China Construction vs. Advanced Wireless Semiconductor |
| TECO Electric vs. Walsin Lihwa Corp | TECO Electric vs. Far Eastern New | TECO Electric vs. Nan Ya Plastics | TECO Electric vs. Taiwan Cement Corp |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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