Correlation Between China Construction and Nan Pao
Can any of the company-specific risk be diversified away by investing in both China Construction and Nan Pao 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 Nan Pao 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 Nan Pao Resins, you can compare the effects of market volatilities on China Construction and Nan Pao 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 Nan Pao. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Nan Pao.
Diversification Opportunities for China Construction and Nan Pao
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Nan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Nan Pao Resins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Pao Resins 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 Nan Pao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Pao Resins has no effect on the direction of China Construction i.e., China Construction and Nan Pao go up and down completely randomly.
Pair Corralation between China Construction and Nan Pao
Assuming the 90 days trading horizon China Construction Bank is expected to under-perform the Nan Pao. But the stock apears to be less risky and, when comparing its historical volatility, China Construction Bank is 2.45 times less risky than Nan Pao. The stock trades about -0.03 of its potential returns per unit of risk. The Nan Pao Resins is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 13,400 in Nan Pao Resins on September 3, 2024 and sell it today you would earn a total of 19,750 from holding Nan Pao Resins or generate 147.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 39.22% |
| Values | Daily Returns |
China Construction Bank vs. Nan Pao Resins
Performance |
| Timeline |
| China Construction Bank |
| Nan Pao Resins |
China Construction and Nan Pao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Nan Pao
The main advantage of trading using opposite China Construction and Nan Pao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Nan Pao 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 Nan Pao will offset losses from the drop in Nan Pao's long position.| China Construction vs. Taiwan Semiconductor Manufacturing | China Construction vs. Hon Hai Precision | China Construction vs. MediaTek | China Construction vs. Chunghwa Telecom Co |
| Nan Pao vs. Hunya Foods Co | Nan Pao vs. Cameo Communications | Nan Pao vs. BenQ Materials Corp | Nan Pao vs. Advanced Echem Materials |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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