Correlation Between China Construction and CHC Healthcare
Can any of the company-specific risk be diversified away by investing in both China Construction and CHC Healthcare 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 CHC Healthcare 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 CHC Healthcare Group, you can compare the effects of market volatilities on China Construction and CHC Healthcare 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 CHC Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and CHC Healthcare.
Diversification Opportunities for China Construction and CHC Healthcare
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and CHC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and CHC Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Healthcare Group 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 CHC Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Healthcare Group has no effect on the direction of China Construction i.e., China Construction and CHC Healthcare go up and down completely randomly.
Pair Corralation between China Construction and CHC Healthcare
Assuming the 90 days trading horizon China Construction is expected to generate 6.82 times less return on investment than CHC Healthcare. But when comparing it to its historical volatility, China Construction Bank is 7.26 times less risky than CHC Healthcare. It trades about 0.45 of its potential returns per unit of risk. CHC Healthcare Group is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 4,430 in CHC Healthcare Group on November 28, 2024 and sell it today you would earn a total of 1,200 from holding CHC Healthcare Group or generate 27.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. CHC Healthcare Group
Performance |
| Timeline |
| China Construction Bank |
| CHC Healthcare Group |
China Construction and CHC Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and CHC Healthcare
The main advantage of trading using opposite China Construction and CHC Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, CHC Healthcare 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 CHC Healthcare will offset losses from the drop in CHC Healthcare's long position.| China Construction vs. Kworld Computer Co | China Construction vs. Central Reinsurance Corp | China Construction vs. Dimension Computer Technology | China Construction vs. Cameo Communications |
| CHC Healthcare vs. Phytohealth Corp | CHC Healthcare vs. GenMont Biotech | CHC Healthcare vs. Hung Sheng Construction | CHC Healthcare vs. De Licacy Industrial |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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