Correlation Between China Construction and Linzhou Heavy
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By analyzing existing cross correlation between China Construction Bank and Linzhou Heavy Machinery, you can compare the effects of market volatilities on China Construction and Linzhou Heavy 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 Linzhou Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Linzhou Heavy.
Diversification Opportunities for China Construction and Linzhou Heavy
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Linzhou is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Linzhou Heavy Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linzhou Heavy 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 Linzhou Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linzhou Heavy Machinery has no effect on the direction of China Construction i.e., China Construction and Linzhou Heavy go up and down completely randomly.
Pair Corralation between China Construction and Linzhou Heavy
Assuming the 90 days trading horizon China Construction Bank is expected to generate 0.46 times more return on investment than Linzhou Heavy. However, China Construction Bank is 2.19 times less risky than Linzhou Heavy. It trades about 0.09 of its potential returns per unit of risk. Linzhou Heavy Machinery is currently generating about -0.02 per unit of risk. If you would invest 808.00 in China Construction Bank on November 7, 2024 and sell it today you would earn a total of 46.00 from holding China Construction Bank or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. Linzhou Heavy Machinery
Performance |
| Timeline |
| China Construction Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Linzhou Heavy Machinery |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Construction and Linzhou Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Linzhou Heavy
The main advantage of trading using opposite China Construction and Linzhou Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Linzhou Heavy 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 Linzhou Heavy will offset losses from the drop in Linzhou Heavy's long position.The idea behind China Construction Bank and Linzhou Heavy Machinery 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.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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