Correlation Between China International and China State
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By analyzing existing cross correlation between China International Capital and China State Construction, you can compare the effects of market volatilities on China International and China State 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 International with a short position of China State. Check out your portfolio center. Please also check ongoing floating volatility patterns of China International and China State.
Diversification Opportunities for China International and China State
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and China is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding China International Capital and China State Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China State Construction and China International 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 International Capital are associated (or correlated) with China State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China State Construction has no effect on the direction of China International i.e., China International and China State go up and down completely randomly.
Pair Corralation between China International and China State
Assuming the 90 days trading horizon China International Capital is expected to under-perform the China State. In addition to that, China International is 1.35 times more volatile than China State Construction. It trades about -0.08 of its total potential returns per unit of risk. China State Construction is currently generating about -0.08 per unit of volatility. If you would invest 614.00 in China State Construction on August 28, 2024 and sell it today you would lose (25.00) from holding China State Construction or give up 4.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China International Capital vs. China State Construction
Performance |
| Timeline |
| China International |
| China State Construction |
China International and China State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China International and China State
The main advantage of trading using opposite China International and China State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China International position performs unexpectedly, China State 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 China State will offset losses from the drop in China State's long position.The idea behind China International Capital and China State Construction 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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