Correlation Between China Construction and Jiangsu Expressway
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By analyzing existing cross correlation between China Construction Bank and Jiangsu Expressway Co, you can compare the effects of market volatilities on China Construction and Jiangsu Expressway 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 Jiangsu Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Jiangsu Expressway.
Diversification Opportunities for China Construction and Jiangsu Expressway
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Jiangsu is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Jiangsu Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway 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 Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of China Construction i.e., China Construction and Jiangsu Expressway go up and down completely randomly.
Pair Corralation between China Construction and Jiangsu Expressway
Assuming the 90 days trading horizon China Construction is expected to generate 17.18 times less return on investment than Jiangsu Expressway. But when comparing it to its historical volatility, China Construction Bank is 1.62 times less risky than Jiangsu Expressway. It trades about 0.04 of its potential returns per unit of risk. Jiangsu Expressway Co is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 1,259 in Jiangsu Expressway Co on September 1, 2024 and sell it today you would earn a total of 159.00 from holding Jiangsu Expressway Co or generate 12.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. Jiangsu Expressway Co
Performance |
| Timeline |
| China Construction Bank |
| Jiangsu Expressway |
China Construction and Jiangsu Expressway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Jiangsu Expressway
The main advantage of trading using opposite China Construction and Jiangsu Expressway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Jiangsu Expressway 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 Jiangsu Expressway will offset losses from the drop in Jiangsu Expressway's long position.The idea behind China Construction Bank and Jiangsu Expressway 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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