Correlation Between China Construction and TS Communications

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

Diversification Opportunities for China Construction and TS Communications

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between China and 300570 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and TS Communications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TS Communications 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 TS Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TS Communications has no effect on the direction of China Construction i.e., China Construction and TS Communications go up and down completely randomly.

Pair Corralation between China Construction and TS Communications

Assuming the 90 days trading horizon China Construction Bank is expected to generate 0.22 times more return on investment than TS Communications. However, China Construction Bank is 4.61 times less risky than TS Communications. It trades about 0.34 of its potential returns per unit of risk. TS Communications Co is currently generating about -0.19 per unit of risk. If you would invest  790.00  in China Construction Bank on September 12, 2024 and sell it today you would earn a total of  47.00  from holding China Construction Bank or generate 5.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

China Construction Bank  vs.  TS Communications Co

 Performance 
       Timeline  
China Construction Bank 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Construction sustained solid returns over the last few months and may actually be approaching a breakup point.
TS Communications 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in TS Communications Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TS Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

China Construction and TS Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Construction and TS Communications

The main advantage of trading using opposite China Construction and TS Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, TS Communications 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 TS Communications will offset losses from the drop in TS Communications' long position.
The idea behind China Construction Bank and TS Communications Co 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.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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