Correlation Between China Construction and Changchun Faway
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By analyzing existing cross correlation between China Construction Bank and Changchun Faway Automobile, you can compare the effects of market volatilities on China Construction and Changchun Faway 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 Changchun Faway. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Changchun Faway.
Diversification Opportunities for China Construction and Changchun Faway
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Changchun is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Changchun Faway Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun Faway Auto 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 Changchun Faway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun Faway Auto has no effect on the direction of China Construction i.e., China Construction and Changchun Faway go up and down completely randomly.
Pair Corralation between China Construction and Changchun Faway
Assuming the 90 days trading horizon China Construction is expected to generate 1.03 times less return on investment than Changchun Faway. But when comparing it to its historical volatility, China Construction Bank is 1.5 times less risky than Changchun Faway. It trades about 0.05 of its potential returns per unit of risk. Changchun Faway Automobile is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 859.00 in Changchun Faway Automobile on September 1, 2024 and sell it today you would earn a total of 84.00 from holding Changchun Faway Automobile or generate 9.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. Changchun Faway Automobile
Performance |
| Timeline |
| China Construction Bank |
| Changchun Faway Auto |
China Construction and Changchun Faway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Changchun Faway
The main advantage of trading using opposite China Construction and Changchun Faway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Changchun Faway 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 Changchun Faway will offset losses from the drop in Changchun Faway's long position.The idea behind China Construction Bank and Changchun Faway Automobile 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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